In this interview Kyle Leighton, Founder and CEO of Leighton Property Management, shares what it takes to succeed with real estate investing.
What made you decide to start investing in real estate?
Like most business people, I wanted to diversify my assets. My brother, Eric Leighton, had just gotten a realtor’s license when I became interested in buying. So, I started looking at potential properties with him. For my first deal, I purchased 4 investment properties with immediate cash flow and equity. That set the foundation for Leighton Property Management, and I kept going after that.
What are the benefits of real estate investing which other types of investments don’t offer?
Most other investment strategies are market driven. The stock market is a good example of that. As an investor, you have zero control over what the stock market does or the money you make.
Real estate is a much more controlled, safe investment option as long as you follow two principles: 1) Don’t overpay for the property when you buy it and 2) Don’t buy property in a depreciating area. If you are a buy and hold landlord, you can build a solid, predictable stream of passive income as long as you stick to those two principles.
What are the three most important factors you need in order to succeed as a real estate investor?
1. Research. You need to research markets incredibly well. I look at dozens, and sometimes hundreds of properties per day. I look at properties in different markets and compare. If I understand the market, then I know exactly how much I should pay for what I’m looking for. It also helps me spot great deals when they pop up.
2. Problem solving. Investors think they are in the “house business”. In reality, we are in the problem-solving business, and “houses” are just the solution. I often line tenants up with a property before I buy it. There’s been numerous times where I have taken tenants with me to showings to make sure that the property I am considering will satisfy their need. If it does, then I buy it.
3. People. I have always had great people involved in my deals. In the beginning it was my brother, and later I worked with Marc Meyer of Thinking Real Estate and Mike Kendall of Beiswanger and Risner. In many transactions, and probably unbeknownst to the seller, they make the final decision and not me. I rely heavily on the expertise and input of experienced people that I trust, and that has definitely helped me pick up valuable property that I might’ve overlooked.
What do you wish someone told you when you started your career in real estate investing and which took time to figure out on your own?
It’s important to familiarize yourself with the municipality, it’s codes or ordinances, of which you’re buying the property in. All municipalities have their own set of rules and regulations for landlords, tenants and property rehabilitations. Most municipalities have some sort of department head, or a group of inspectors that you can speak to. Check in with them if you’re unsure about something before you make the deal. I haven’t come across a municipality that hasn’t been happy to help.
How did the Michigan real estate market perform in 2020? What are your expectations for 2021?
Our market is pretty stable. Like most areas, we had low inventory this past year. However, housing prices remained stable, and Michigan’s rate of growth seems sustainable. I expect 2021 and beyond to be very similar.
What’s the current state of the Michigan housing market? What makes Michigan a good place for investing in real estate?
Like most other areas, the Michigan real estate market is definitely a seller’s market. The things that make Michigan a great place to invest are our stable market and our affordable home prices. The average price of a home sold in Michigan as of June 2020 was $192,104, according to the Michigan Association of Realtors. Home prices are very affordable here compared to other states in the US, so it’s a great place to buy rental property.
What’s the most traded property type in Michigan?
Single family homes are probably the most sought-after properties, but there is a strong market for multi-family properties. Commercial properties have taken a hit since the pandemic.
What’s the most profitable investment strategy in Michigan? Are rental properties performing well? What’s the average return on investment?
That depends on who you ask. If you ask a rehabber, they are likely going to tell you rehabbing is the most profitable strategy. The same is true for a buy and hold investor. My opinion is that you really can’t go wrong either way… if you buy low, and buy smart.
Rental properties provide both passive income and long-term wealth. If you buy good properties in appreciating areas, you can definitely do better over time than with many other types of investments. According to Mashvisor, a real estate data and analytics
platform, you can expect a ROI of 10-15% if you invest passively. It can be higher for people that manage their own properties.
Final thoughts on real estate investments
If you’re looking to diversify, and you don’t mind dry research, real estate investing is a great vehicle for establishing a prosperous future. You can come from any background, you can have any level of education, and neither your age nor your gender has anything to do with your ability to be successful. It really is a fantastic business to pursue.