Tax attorney, author, and real estate investor, Brian T. Boyd knows real estate. His sweet spot is helping aspiring and beginner real estate rental investors to take the leap and replace their income from their day jobs, or to build generational wealth.
We recently caught up with him to ask some of the most common questions we receive about investing in real estate. Here is what he has to say:
Charlotte Davis: You say a housing crash is very UNLIKELY to happen anytime soon. What makes you so sure?
Brian Boyd: The fears of the housing crash of 2007-2010 happening again are unfounded, given the underpinnings of the financial markets and the rule of scarcity. In 2007-2010 there were too many houses on the market, and the financial regulations allowing for income-stated loans were liberal at best. In the years since that crash, housing inventory is lagging months behind, and currently, about 4 million homes are needed to meet demand.
Moreover, Congress, the SEC, and the banks have put safeguards in place to hedge against defaults. Current efforts to stave off a crash are being undertaken by the FED and the banking industry, with banks adhering to the new rules that were promulgated after the last crash. Further, real estate investors are, including Wall Street hedge funds, swooping in to buy up any real estate they can. All these factors have coalesced to act as a bulwark to guard against the rising waters of a softening market and high-interest rates.
Davis: How can today’s mortgage interest rates BENEFIT rental property owners?
Boyd: Today’s interest rates are not a concern for the real estate investing community. Investors are not concerned about the interest rates the way that home buyers are with their primary residence. There are a few reasons for this: First, real estate investors will simply refinance out of a high-interest rate as soon as rates drop – it is simply part of real estate investing. Second, the interest rates are not paid by the investors; they are paid by the renters of those properties, and that interest rate is baked into the rent each month. And lastly, investors who really pay attention to these numbers know that 26 USC Section 163 allows for the deduction of business interest paid on those loans. Thus, real estate investors simply look at the current mortgage rates as a way to narrow the field of competitors for properties.
Davis: How can you PROFIT from inflation by buying and holding rental properties?
Boyd: Profiting from the current inflation vis a vis a buy-and-hold strategy is simply an appreciation play. During the current inflation of the market, prices spiked, which allowed for investors to perform cash-out refinancing loans to take more equity from the property and leverage that into a scaled-up portfolio. While prices are now coming down, or evening off, those same properties are still going to appreciate with the market at an average of 3-5% per year. Thus, over the long-term hold of those properties, they will continue to cash flow for the owner, and increase in value resulting in the creation of profit.
If you’re exploring taking the plunge into becoming a real estate investor, Brian Boyd offers some great tips including the following:
- Educate yourself on real estate investing: Read books, attend seminars, and network with experienced investors to learn the ins and outs of the industry.
- Set clear financial goals: Determine how much income you want to replace and by when.
- Choose a niche: Decide on a specific area of real estate investing that aligns with your skills, interests, and financial goals. This could be anything from rental properties to fix-and-flips.
- Develop a plan: Create a detailed plan for acquiring properties, financing deals, managing tenants (if applicable), and achieving your financial goals.
- Build a team: Surround yourself with professionals such as attorneys, accountants, lenders, contractors and property managers who can help you achieve success in your chosen niche.
- Take action: Start taking steps towards building your real estate portfolio by identifying potential investment opportunities and securing financing.
- Monitor your progress: Continuously evaluate your investments to ensure they are meeting your financial goals.
It’s important to note that replacing your income through real estate investing is not an overnight process; it takes time and effort. However, by following these steps and remaining committed to your goals, you can achieve success in this industry.
Brian Boyd is a tax attorney, real estate investor, and author of the book, Replace Your Income: A Lawyer’s Guide to Finding, Funding, and Managing Real Estate Investments.