Can Real Estate Investing be a Lucrative Side Hustle?

Author: Scott Zandbergen

I didn’t start investing in real estate with the intention to make it a side hustle. I started because I was frustrated with my investments in mutual funds and ETFs. I wanted better returns on my money and I wanted to see a realistic path to creating wealth.

So, I did what most people do: I sat on the sidelines for years. I watched HGTV. I occasionally looked at properties, then got bogged down in scary “what-if” scenarios and never-ending analysis paralysis. And I did nothing.

Until one day five years ago, I finally kicked myself in the pants and said enough is enough. I’d wasted enough time, so I took action. I acquired my first three investment properties in a span of three months, and I continued on from there.

Here’s what I learned along the way:

Building a side hustle on Money & Mimosas

You have to put in the effort

Real estate investing is a solid investment strategy, but it’s not completely hands-off in the same way throwing your money into the stock market is. You need to be prepared to invest not only your dollars, but also some time into this. Don’t believe it when people say this is “passive income.”

You can’t do it alone

You need a dream team. Most real estate investors I know also work full time, so you need a good, dependable team that you can lean on. My team consists of a couple realtors, a mortgage broker, accountant, lawyer, home inspector, contractors, and various trades-people. Everyone in my dream team specializes in working with investors. When I get a call from a tenant because they have a clogged sink or leaky toilet, I make a phone call and the problem gets solved – I’m not running around to these houses with my tool box. It took some time to build up the contacts and relationships, but this is what helps me keep my sanity.

Get comfortable with debt

Good debt. You can’t build a real estate investment portfolio unless you’re comfortable with taking on debt. You’ll end up having multiple mortgages in your name, but guess what, you’re not the one paying the mortgage each month. More on that below.

Returns come in various ways

The lowest return I’ve seen on an annual basis has been 20 percent, but if you invest in good areas, it’s not uncommon to see much higher. There are 3 main ways in which you’ll realize returns on a real estate investment:

Cash flow. As long as you are buying properties where the monthly rent more than covers the mortgage, taxes, and insurance (otherwise known as your “carrying costs”), you’ll have some monthly cash flow in your pocket. For what it’s worth, I only invest where there’s healthy cash flow; not only do I want to cover all the carrying costs, I also expect the cash flow to cover unexpected expenses such as maintenance and vacancies. If you can’t make the numbers work, invest in another property or a different market. Don’t fall into the trap of convincing yourself that $200/month out of your own pocket to cover the shortfall is a good idea.
Mortgage paydown. Your tenant is essentially paying your mortgage each month, meaning all of that debt paydown is a return on your investment. After 20-30 years, you’ll own that house free and clear.

Market appreciation. History shows us that housing generally appreciates over time. Yes, there will be setbacks (and even crashes), but as long as you’re in it for the long game, you’ll come out OK. In the area that I invest, I usually factor in 4 percent price appreciation each year, even though some years we’ve seen as high as 20 percent.

Real estate investing gives me more control over the outcome

With stock market investments, if I choose to invest my money in a company, I have no control over the decisions the CEO and Board make, which ultimately will determine the returns I see on my money. With real estate, I have control over:

The use of the property: I can buy a single-family home and convert it to a duplex/two-unit dwelling which increases the value. In real estate circles, that’s called “forced appreciation.”

It also happens to be my favorite strategy.

The tenants I choose to put in my house, and the level of service I provide to them.

The maintenance and upgrades I choose or choose not to do. I can decide to renovate the bathroom, which will make it easier to find a good tenant and fetch higher rents.

You need to take action

If you are serious about starting in real estate investing, then start. Right now. Start looking at investment properties, find an investor-focused realtor and mortgage broker. Start putting wheels in motion. If you don’t feel comfortable going it alone, partner up with an experienced real estate investor who can show you the ropes and introduce you to their dream team.

The Bottom Line

As someone that has been growing a portfolio of investment properties over the last five years, I often get asked by family, friends, and colleagues if it’s worth the headache.

The answer is: absolutely. If you’re willing to put in the time, energy and dollars to get the flywheel going, it can become a game changer towards building financial freedom. Even owning one investment property (other than your principal residence), can change your long-term financial situation in a significant way.

Although once you start investing and start realizing the gains that can be made, trust me, it’ll be hard to stop.

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Scott has worked in the accounting technology field for over 20 years and is currently with Intuit as a leader and advocate for the Canadian accounting community. He also actively works on his side hustle, having acquired over $3.5 million in profitable investment properties, not including his principal residence.

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