Real estate investing is one of the most powerful investment options out there. There are countless strategies out there but at the fundamental level all are looking for some combination of 4 key things:
Appreciation
Cash flow
Loan pay down
Tax benefits
Real estate investing is one of the only ways to invest that allows you to be truly creative.
There are ordinary people out there making ordinary salaries doing some incredible things through real estate investing and they’re making extraordinary returns doing it.
So let’s explore all of this in more detail!
Real Estate Investing in Spokane and Coeur d'Alene
The Inland northwest as a whole is a great places to invest in real estate. This area is no longer a secret. It was able to fly under the radar for a while but now the secret is out and people want a piece of it.
We have a phenomenal quality of life with natural beauty in every direction, a growing population, a relatively affordable cost of living, large established economic drivers like Universities, colleges and hospitals with more to come as this area grows.
We have no state income or business tax in WA and a very business friendly climate in north Idaho too.
The Spokane/North Idaho area is set for real economic growth in the short, medium and long term.
There are countless reasons people want to be here. We have people visiting for the short term to visit the towns, cities, lakes and mountains all year round. We have traveling professionals visiting for the mid-term and of course we have a net inflow of people moving here for the long term.
So, in short, the Inland Northwest is an area people want to be, it’s growing economically and has incredible future growth potential.
Real Estate Investing Strategies
These are all strategies that I've seen people (including myself!) actually using and succeeding at in this area.
Flipping as a Real Estate Investment Strategy
Let’s start with the most famous strategy (and the strategy with the worst reputation), flipping.
The Inland Northwest area is littered with flip candidates from characterful older homes in the City of Spokane to lake front properties and neglected cabins in North Idaho. And you can still find the worst house on the street in the best neighborhood here if you’re prepared to look.
Flipping is a great strategy to pursue in the appreciation stage of the market cycle. A lot of flippers use short term loans that come with high interest rates so they need to move quickly because every month those high interest payments eat away at their final profit.
Appreciation Stage = Seller's Market
As you’ll have no doubt seen on tv channel like HGTV it’s those unexpected costs you encounter along the way can make or break your deal. In an appreciating market that may cause you to profit less when you sell but in an depreciating market they might cause your return to go negative. If you’re an experienced flipper rolling your eyes then do your thing, this advice is more geared towards the beginners out there but just remember I offer discounted listing fees to flippers who buy their flip with me.
Live In Flipping Strategy
Remember also that capital gains are a thing and can add up to a substantial chunk of your profit.
For this reason many people who are just getting started pursue the live in flip strategy where they do the work gradually and wait for that two year mark to hit before selling.
This can be a great option for those that want to pursue real estate investing as a side hustle. Or for those that want an easier introduction without as much risk. After all if you can’t sell it for a profit when you’re done you can still just live in it a little while longer until you can sell or you can just keep it as a rental. It’s nice to have options instead of hemorrhaging money with high interest rate short term loans.
BRRR Real Estate Investing Strategy
A modified version of the flip is the BRRR method:
Buy
Rehab
Rent
Refinance
Repeat
This is where an investor identifies a run down property and renovates it to be a desirable unit. Instead of selling you then make your money on the refinance. You keep the property, rent it out and repeat the process by using the cash you pull out from the refinance as a downpayment for a new project.
This just shows there are as many ways as you can imagine to make money as a real estate investor and that’s just flipping or renovating, there are a ton more strategies out there.
"Buy and Hold" Real Estate Investing Strategy
The next strategy I see a lot of people pursuing is the classic buy and hold. Now, one thing that you’ll find when you start to analyze deals as a buy and hold investor is that there really isn’t much cash flow in it in this market. Prices have crept up significantly in recent years but average incomes for the area have barely kept pace with inflation. Thus the ratio of rents to property values has been compressed. A lot of people talk about the 1% rule where monthly rents should be 1% of the properties value. That isn’t really possible here and hasn’t been for a while.
A lot of people talk about the 1% rule where monthly rents should be 1% of the properties value. That isn’t really possible here and hasn’t been for a while.
However, there are ways to get creative and maximize your cashflow. Consider targeting a property near the universities and renting it by the room to students. Consider buying a property and renting to professionals who’s employers provide a housing stipend like traveling nurses. You might even consider targeting those destination/resort type area in the Inland Northwest and offering the property as short term rental to really ramp up that cash flow.
Like I said you can get creative with real estate investing, there really isn’t just one way to do it.
But what happens if you still can’t cash flow and you’re only breaking even or even making a small loss each month. Well remember what I said at the start of the video, real estate investing is great for four separate reasons and cashflow is only one of them.
At a break even on cash flow your loan is still being paid by someone else, your property is likely still appreciating and you may still be getting tax benefits like depreciation. So don’t dismiss it outright if it’s not cash flowing. I see a lot of people wanting $200 a door or they won’t buy a deal.
Ask yourself: "Is $2400 a year really that important? Or is it more important to buy a $300,000 piece of real estate that’s been paid for by someone else and will be probably be worth 450K in 10-20 years time? "
Imagine you bought a property when your child is born. No cash flow but it’s appreciating and that loan is paying itself off. On their 18th birthday how much equity are you handing over to that child?
Enough to pay for college?
Enough for them to start a business?
Enough to become real estate investors themselves?
Cash flow isn’t everything.
House Hacking Real Estate Investment Strategy
The next strategy I see people pursuing and one that’s become increasingly popular is the house hack.
House hacking is not a complicated strategy at all and doesn’t involve any complex trickery as the name suggests. The idea is that you buy a 1-4 unit property and bring in one or more renters to help cover or substantially cover your personal housing expense.
That’s it in a nutshell.
Not a lot of people know this but you can buy a property with up to 4 units as a primary residence without needing to get a special sort of loan. Meaning you can benefit from the more favorable primary residence interest rates, you can even use a VA or an FHA loan to pursue this strategy and really reduce the amount of cash you need to put into the deal.
Not a lot of people know this but you can buy a property with up to 4 units as a primary residence without needing to get a special sort of loan.
This is an incredible way to reduce strain on your monthly budget and start to head down the path of real estate investing and eventually financial freedom. This is genuinely an amazing way to get started with real estate investing, I wish I did this myself when I first got started it would have put me years ahead.
I also see people getting creative with this and splitting their time between different regions of the US.
For example, I have a client that lives by the lake in the Inland Northwest in the summer months and lives down in phoenix in the winter month. She reduces her housing expense by 'air bnb-ing' the home she’s not occupying This is still a house hack of sorts, it just goes to show you can get creative with real estate investing and use it to live the lifestyle you want to live.
Other Creative Real Estate Investing Strategies
There are more specialized strategies you might want to look into too, land development, land banking, wholesaling, novation agreements, air bnb arbitrage and buying or assuming mortgages.
These tend to be more complex and with the exception of land banking they’re probably not for the beginner.
Investing in real estate is the only form of investing I can think of where the only limiting factor is your own imagination. And the ability for return is almost endless.
I hope this blog was useful!
If you don't know already, my name is Phil Wells and I am a licensed real estate agent in Washington and Idaho and serve clients in the Spokane Area and throughout North Idaho. So, please feel free to reach out, give me a call, shoot me a text, send me an email or direct message me on Facebook or Instagram and I would be honored to work with you.
Until the next post, thanks for reading!
- Phil Wells
(509) 992-9332
