Buying real estate during a pandemic might be seen as risky, but it can be a good opportunity for those wanting to get into this space. Sharon Tseung, the Founder of Digital Nomad Quest, has been teaching people to be financially free by creating passive income businesses to allow them to design their best lives. Today, we talk about her recent acquisition of 5 units during the pandemic and how she got started in her real estate career.
Through her website, Sharon teaches people popular passive income streams such as selling on Etsy and blogging. She created toolkits for different income streams that show people how to pursue those.
But even with her existing network of passive income, she’s still very interested in real estate and sees it as a very good way to achieve financial freedom.
Sharon bought her first property in 2012 when she was just 22 years old. Her parents had asked her if she would be interested in investing. With her parent’s guidance and the broker referred by friends, she was able to buy her first property.
At that time, prices had dropped following the 2008 crash and with encouragement from Sean to invest, she took the leap. She spent $13,000 renovating the property and had to spend 6 months trying to get rid of a bad tenant.
Later, during the COVID-19 pandemic, she purchased 5 more rental units in Texas.
Being an introvert, Sharon didn’t like calling people. Plus, she didn’t know who to contact in the first place. She sees getting started in real estate as a daunting process.
But when the steps got broken down and she understood them, she was able to move forward. It also helps to have someone there to hold you accountable, like Sean.
From start to finish, it took Sharon a few months to close on the property in Texas. If you have a good property management company in place, you really won’t have to exert much effort.
For some people, investing in real estate could be pretty hands-off, and it’s not as hard compared to starting a new business.
Now that Sharon understands the process, she plans to just keep replicating that over and over again. She prefers this over buying turnkey properties.
The 4-plex in Texas was the first property that she purchased out of state. The deal was referred to her through a buyer’s agent found in BiggerPockets. The property was priced at $175,000, and she put in a 25% down payment.
Three of the units rent at $500 a month with the other unit renting at $595 a month. Right now, the property cash flows for $700 a month net of mortgage, property management fees, taxes, and other expenses.
She found the deal to be low risk because it has multiple units. What’s also good is that the cash flow is able to cover the mortgage.
Following that, she purchased a single-family home for a steal at $23,000 with $1,000 spent on the title and closing costs. The repairs she had to do though cost more than the property. She had to spend $33,000 for renovations.
That home cash flows now a net of $600 a month. And since she purchased it without a loan, she doesn’t have to worry about paying for the mortgage.
Sharon was already looking at buying the out of state units before COVID-19 happened. When the pandemic spread, she was initially worried about people not being able to pay their rents.
But the purchase price was so low that she felt she would be fine even if she lost money. Also, by buying the single-family home with cash, she owns it free and clear.
Sharon used to do one-off, passive income streams such as Merch by Amazon. While she was traveling as a digital nomad and living in Southeast Asia, she was able to live off her income from that. But she didn’t feel fulfilled.
After coming back to the Bay Area, she came up with the goal to build her own brand, which would be way more in line with her and what she’s doing.
Most people get scared of doing everything and make mistakes. All that is needed is for people to take the leap, start calling people in the space, and figure out how to do it.
Sharon’s not in a rush to buy another property. She plans to keep browsing should there be properties she’d like to invest in.
One investment idea she’d like to do in the future is to own a property overseas that she would rent out on Airbnb. This would still be in line with her digital nomad journey.
She hasn’t decided where to invest yet but finds Portugal an interesting place as it is affordable and was booming with tourist visitors before COVID-19.
I asked Sharon what were the common questions asked by the viewers who watched her viral TikTok videos on how she makes money from her real estate properties.
It’s pretty easy to assume that someone got money from their parents to buy a house. But Sharon worked a lot, took part-time positions, and set up many passive income streams to be able to save up money for her capital.
While she started with a low salary in her first job, she moved from one position to the next, so her salary got bumped up. This happened because she wasn’t totally happy and fulfilled in her job.
If you want to be able to save up for the down payment, start by reducing your expenses. Take note though that there’s only so much you can take out of your spending. The best way is still to increase your income sources.
Try to learn a lot of different things so that you can put in place more income streams to build your capital.
Everyone’s risk tolerance is different. Sharon is risk-averse. So she suggests making sure you have your necessities covered and have a decent amount saved up before you buy a property.
Down payments range from 20-25%, and there would be closing costs on top of that. While most people are able to make good profits from one huge deal, Sharon doesn’t like putting everything in one basket.
To get a good idea, the 4-plex she bought had a purchase price of $175,000. Sharon had to put a down payment of $45000 and spent $5000 for repairs. It’s better to have reserves because you might fight that the property might need more repairs than estimated. So having double the funds needed, like having $100,000 set aside, is better.
There have been stories of some people being able to invest with just $10,000. This is nice, but to be safe, whatever is the down payment needed, it’s wiser to have double that money in the bank.
Remember that the market can turn or you could lose tenants. If that happens, your property wouldn’t generate any income for you to pay off your mortgage.
Make sure you’re building up your income streams because getting the capital is the hardest part.
Take action. Call a bunch of people and grow your network. That’s where you’ll find deals.
Don’t forget to have a decent amount saved and maintain a good reputation by doing what you say you’d do.
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