Real Estate Wealth Creation Journey with Shawn Peng
As a full-time professional in a top company, is it possible to create wealth through real estate investment? If so, how to squeeze time in to do proper research and not being fully occupied by the crazy workload? In this article, a 5-year real estate investor who is also a full-time scientist in a top pharmaceutical company answer these questions in the MIT podcast.
Shawn Peng (Full-time scientist / Real Estate Investor)
Shawn Peng is working in a top pharmaceutical company as a scientist. At the same time, he is also a real estate investor with assets in Massachusetts, New York, Indiana, and recently looking to invest in North Carolina. He has been in the real estate industry for about 5 years now.
Time management is the main reason that allows him to achieve great success in both careers. As he segregated his time efficiently by using weekends to focus on the real estate investment, while every weekday after 6 p.m. to do some underwriting.
How Did The Journey Begins?
In 2012 he was still a graduate student, paying rent just like all his friends. However, he managed to seek help and purchased a condo near the school. The condo has 3 bedrooms and 2.5 baths. He then hired a contractor to build a wall dividing the living room into a 4 bedroom. The next brilliant move he did was renting out all 3 bedrooms, so that he could live for free in addition of some rental income.
Today, the thing that he did is called “house hacking”. Basically, one would purchase a house, divide the rooms and rent it out, so that they can live in it for free, while getting some rental income.
This incident changed his mindset since then.
Shawn’s advice for New Real Estate Investor
Being more open-minded
Changing your mindset and adopting the idea that investing in real estate is mostly the most efficient for an average person to achieve financial freedom and pursue wealth.
The Biggest Fear of the First Purchase
Shawn defines failing as ‘running out of money’, which leads to being unable to pay the mortgage, and could not sustain a living. He believes that buying real estate is a way to make money, compared to stocks and an ETF, the risk is much lower. His experience also proves him right.
Back in 2012, when the housing prices were at the bottom, he purchased a condo at $180,000. Till today, the property is already selling at $370,000, almost doubled in value.
How to Spot a Good Deal with One Percent Rule
Shawn uses the ‘1% rule’ to do a quick analysis when spotting a real estate deal.
For example, when he sees a house listed at $100k and the monthly rent is at $1k. He’d consider this house as a good deal, as the monthly rental generated equals to 1% or more than 1% of the selling price.
However, if the rent is lower than $1k , it simply doesn’t fit in the 1% rule. So, when you have a deal that is showing 1% or above, that means it’s a pretty good deal.
This rule is just for reference and quick decisions. It has some restrictions too. In very expensive markets like Boston, New York, and San-Francisco, the 1% rule does not apply. But on average, for most of the estate in US, one percent rule is applicable.
Lessons from Shawn :
1. Location, location, location
Shawn recalls partnering up with Benjamin and they bought a house in Indiana. The project management company ghosted them so they were left with no contractor to fix the house. Eventually, they found another property management company attempting to solve the issue. But they were unable to rent it out, switched to the third company, still weren’t able to rent it out. In the end, they concluded that the neighbourhood was really rough, therefore it is very important to choose a good location above anything else when it comes to real estate.
2. Driving Distance Only:
The second lesson he learnt is to not invest out of the state. Or else, at least have somebody to be your eyes on the ground. This person should be your contact and reliable enough to handle the business. This way it is easier to manage your property.
Why Is It Important To Underwrite The Deals?
When it comes to buying real estate, it is all about numbers. You should not put your emotions into the building. At the same time, look for other factors, not just numbers. Do a thorough marketing research. If you have a budget, have a team do the work for you.
Do’s & Don’ts When Investing in Real Estate
Educate yourself with the available resources online. Listen to the podcasts, read or watch videos on YouTube.
Look at the number instead of the emotion. It is always better to partner up with somebody who is more experienced.
Don't put all the eggs in a basket, aka betting on one deal. In that case, even if you failed, you still have the reserve to start over again.
Real Estate Market in 2022
In Shawn’s perspective, the housing price will plateau and slow down a little bit at a certain time. However he doesn’t see it going down significantly. It won't crash until some other event happens but for now, in the foreseeable future, he believes that housing prices will continue to go up.
Shawn’s Future Goal in Real Estate
Invest in the multi-family area as it is the easiest way to build wealth.
Looking into some vacation rentals for the Southern States because there is an increasing demand for luxury vacation rentals in recent years.
Reach Out to Shawn Today
