6 tips for investing in real estate as a nurse
In a recent Ask Nurse Alice podcast, Nurse Alice shifted gears from discussing the intricacies of the pandemic and interviewed mortgage expert Ivan Simental to gain some insight into how nurses can put to good use all that COVID and paid overtime: investing in real estate to make their money work for them and be better prepared for financial freedom in the future.
In the episode “How to Invest in Real Estate as a Nurse”, Nurse Alice speaks with Mortgage Loan Officer Ivan Simental NMLS #1762746, host of The Mortgage Reports podcast, to explain why it is a good idea for nurses to invest in real estate.
If you are considering buying a home or investing in real estate in any other way, there are definitely some considerations you should take into account. There are many advantages to owning your own home, nurse Alice noted, because you’re paying for your living space yourself, instead of someone else (who’s making money off of you). But that doesn’t mean you have to jump straight in – here’s what Simental recommends nurses do before investing.
#1: Hire a trusted professional
The first and most important thing Simental advised listeners to do is find a trusted professional, like a loan officer, who can help them on their journey to home ownership or real estate investing. He suggested asking family members or scouring social media or checking reviews to find someone you compete with.
Once you find that person, you can lay out your plan, and the right professional will be able to tell you exactly what steps you need to take – from getting your finances in order to accumulating your savings, to putting on the track of your work history – to make this plan a reality.
He recommended that you find a professional as soon as possible, even if you’re not looking to invest for a year or two.
“It’s better to have an action plan in place so that a year from now when you want to start, you’re not like, ‘Oh man, I wish I had this plan a year ago,'” he pointed out. outside. “So get in touch with a trusted professional, make a plan and let them know your goals. There are plenty of options available for nurses or just individuals in general, so you can prepare for strategic and financial freedom in the future. ‘to come up.
#2: Consistency is Key
For traveling nurses, who may have income gaps due to different assignments, Simental notes that what loan officers and mortgage lenders will be looking for is consistent income for at least two years. Even though there are weeks off between contracts, the important thing is to know that as long as you have W2s that show consistent earnings, you should be good to go.
For new traveling nurses looking to purchase a home through traditional financing, Simental recommends that they plan to work hard and steadily for at least two years. You can take a week or two between assignments, but if your goal is to buy a house or other real estate, a consistent annual income is necessary to achieve this.
The same principle applies for 1099 nurses, a growing phenomenon, or for nurses who may have held different staff positions and moved around. One or two years of consistent, proven income will factor into an overall loan profile that also takes into account other factors, such as credit rating. Changing employers is not as important as a constant income.
#3: Don’t forget your taxable income
Simental also made the very important point that for nurses who earn high gross income and write off expenses to lower their taxable income, it’s a strategy that pays off in the short term, but when it comes to lending, it’s is taxable income that matters.
A lender can only use what a nurse has earned “on paper,” that is, taxable income, not gross income. So keep that in mind when negotiating your contract and compensation structure if your goal is to own a home within the next two years. It is to your advantage to have a higher taxable income if you wish to obtain a larger loan, as the loan will be based on your taxable income.
“That’s why I say speak with the pros as soon as possible because they’ll let you know how much money you need to make on paper to qualify,” he added.
#4: Real estate is one of the safest investments
If you are a nurse hesitant to invest, Simental has offered the assurance that real estate is one of the safest forms of investment. “People always need a place to live,” he stressed.
However, he always recommended that you always work with a professional, especially if you are looking to buy in an area you are unfamiliar with and planning to rent the space. He also listed some of the property types you might consider:
- Single-family homes
- Townhouse-single family property
- Duplex-two-family property
- Triplex=Property of 3 units
- Quadruplex property of 4 units
If you’re looking for a place to buy to live in but also an apartment building, Simental also came up with this housing hack his mom recommended (but he didn’t listen). The hack is this: buy a 4 unit property with an FHA loan (putting down just 3.5% instead of 20-25%) and live in one of the units for at least 1 year while you rent the other units. After this first year, you can leave this property and buy another one.
“Now you have four people paying you rent, whether it’s $1,000 or whatever the rent is, you should definitely be able to cover your mortgage,” he said. “And once you leave that four-unit property, you can buy another property with the same FHA loan.”
The next property, he explained, should be something you only want to live in for the short term, so that you can then upgrade and rent that property again in another year. So ultimately, through the magic of savings and an FHA loan, you can have 5 people paying you rent in two years. “Now you have cash flow,” Simental commented.
Nurse Alice also came up with her big idea of buying an investment property near a hospital that frequently uses Travelers, as it would lead to a steady stream of income with tenants who work as Travelers.
However, while real estate is generally a safe bet for investing and there are plenty of ways to get your money back quickly, Simental also warned that it’s important to do your homework and work with a professional to not to make financial mistakes. along the way. For example, you’ll want to consider all of the extra expenses that come with owning a property aside from the mortgage and also look at other factors, such as neighborhood and schools and the property’s potential as a rental in the future. .
“Again, talk to a professional and let them write down the numbers and walk you through the process because if you’re trying to do it yourself it’s going to be very difficult because that’s not what you do it day by day,” he said. Explain. “Like I wouldn’t try to draw blood from someone. I don’t do this everyday. I would leave that to the professionals. So it’s the same thing.”
#5: Consider Homeownership Tax Breaks
Simental mentioned the fact that once you own a house or a property, there are tremendous benefits and tax breaks that come with home ownership. There are tax breaks ranging from mortgage interest write-offs to property maintenance expenses.
“You’re setting yourself up for generational wealth and we’re not even talking about the equity you’re going to earn in those properties,” Simental pointed out.
#6: Time in > timing
Last but not least, if you’re trying to time your home purchase at the perfect “timing,” like when the market goes down, Simental advised listeners against doing so.
“Time in market always beats timing in market,” he said. In other words, real estate is especially prone to going up in value over time and that time will become more valuable than buying when prices are low. He also pointed out that even if you time your purchase to get a lower purchase price, that price often accompanies a higher interest rate, so what seems like a cheaper price isn’t always cheaper. .
“Historically, 8-10% is what you’ll earn investing in your primary residence,” he explained, adding that a good time to buy is when it’s right for you.