It's the financial hack that's been dominating social media: the purchasing of rental properties.
From TikTok to Instagram to YouTube, a lot of folks are posting about their rental property purchases — many of them claiming that all it takes is a few "simple steps" and that there is tons of money to be made. But is it as easy as it seems? And is it a financial move you should consider in 2024?
"Sometimes we have to maybe step away from the digital world and do our own homework, so we definitely preach that for sure," Marques Murrey said.
Marques and Shyra Murrey from Sacramento, California, are the couple behind Black, Married and Debt Free, a personal finance platform where they've been documenting their own financial journey, from paying off debt to investing in real estate to preparing for early retirement. They own five investment properties. They say their decision to venture into the world of real estate wasn't made quickly.
"I think sometimes people see other success and they think that it happened overnight. For us, the conversation about investing in real estate, it took place over a course of several years where we educated ourselves," Shyra Murrey said. "We listened to podcasts. We read books. We talk to real people who had experience in real estate investing. And we just took this time to learn to grow and to prepare ourselves. And after we had done our due diligence, it really gave us the confidence to step out there and make that leap."
So, how did they do it?
"We entered this realm in a very unconventional way. As Marques shared, we had a paid off home. We tapped into that equity to buy our first rental property cash," Shyra Murrey said. "Over time, we did end up selling that condo that we had paid off. And when we sold that, it completely paid off that first rental property. And so that put us in a really great position."
In order to fund the purchase of additional properties, a lot of folks have been turning to a home equity line of credit, or HELOC.
Mortgage and rent prices are expected to decrease this year
Median asking rents grew more than 20% over three years, spiking to more than $2,000 a month twice in the past two years.
NerdWallet describes a HELOC as a "second mortgage that gives you access to cash based on the value of your home" and says a HELOC tends to have a lower interest rate than other loans. But securing the funds is only half the battle.
"We live in California, and we have properties in two other states because we just couldn't afford to do it here," Shyra Murrey said.
Which is why the couple says having a clear and updated financial game plan is critical, adding that the economy can change on a dime.
"I think it was important to pinpoint in what way do we want to be real estate investors? Because that's a very broad term. And so, for us it was through buy and hold long-term rental. So, we purchased a home for X amount. We rent it out for more than we're paying the mortgage for, and now we're getting a profit," Shyra Murrey said.
So put yourself in the best situation possible.
"For us, that looked like making sure that we had low to no consumer debt and that we had emergency savings for our own household, but also emergency savings for the rental property," Shyra Murrey said.
The Murreys say it's important to note that being a landlord is not a responsibility to be taken lightly. From finding the property to making repairs to managing it, there's not much that's "passive" about owning a rental property, especially in the beginning. But it's not a weight you have to carry alone.
"I think a lot of times early real estate investors want to do it all: I want to manage. I want to find tenants. I want to vet the tenants. That's a lot of things to do," Marques Murrey said. "Let's say if you start with a really great real estate agent or broker, a lot of times they have already built relationships with the people you need to know. And you can tap into that through your real estate agent or broker."
But don't expect to make big bucks right off the bat, despite what you see online.
"We like to tell folks that one property in and of itself might not change your life. The cash flow on just one property, it could be not what you're expecting it to be," Shyra Murrey said.
And remember, "You hear what folks are doing and it kind of gives you FOMO. It kind of gives you, you know, anxiety because you want to be doing what you see others doing, but just continue to run your own race," Marques Murrey said.
