As founder and CEO of Kay Properties, I talk with hundreds of clients each month, allowing me the privilege of listening to some fascinating life stories while helping people with their long-term investment goals. I recently encountered such a story when I met Frederick and Gloria*.
These two focused individuals met at Georgia State University. After graduating, they found jobs in Atlanta: Frederick as an accountant for a major home-improvement chain and Gloria as a history teacher at an Atlanta middle school. Eventually, the two decided to marry and begin a life together.
Neither Frederick nor Gloria came from wealthy families, but they both had a vision for building wealth and a plan for how to do it. Frederick’s background in accounting and finance taught him that one of the best ways to create wealth was through real estate while also deferring capital gains taxes. Through her love of history, Gloria also understood that the vast majority of the people in the United States who achieved financial success had done so through owning real estate.
So, the two sat down and plotted out a long-term, three-phase plan for entering the investment real estate world.
Building a Real Estate Portfolio in 3 Phases
Phase 1: The Purchase of Their First Rental Property
The first step in their plan was to invest in a single-family home rental property. Even though they understood there would be very little cash flow from this and money would be tight, they also knew that this first step, the entry point into real estate investing, would be the most important one for them in the long term.
Frederick flashed a big, proud smile when he told me that he knew at a very young age that while the cash flow would be minimal at best, they had youth on their side – both in years and in real estate experience, and they would use this investment property as a way to gain valuable experience.
The two also knew that even with a small down payment and large loan, the money was a secondary hurdle to achieving financial independence. The first hurdle they had to jump was to overcome inertia and the urge to overanalyze, and just make the move.
This is an interesting point, and I’ve heard it before from other experienced real estate investors. When entering into the first phase of building a real estate portfolio, novice investors should not expect to find phenomenal deals or that one will just fall out of the sky. Frederick, too, believed the best strategy for acquiring anything in business was to emphasize the business strategy first over the financial strategy, then find …….
