Real Estate Investing 101 With Jarod Machinga

A Beginner’s Guide to Real Estate Investing

We often hear through the media and other sources that investing in real estate is both profitable and rewarding. However, for the new investor, the idea of investing in real estate can feel both broad and complex.

Jarod Machinga is a real estate investor and entrepreneur with four related businesses in plumbing, construction, and electrical. He was born and raised in a family heavily involved in real estate and has a lifetime of experience operating his own investment properties. For Machinga, investing in real estate doesn’t have to be scary if you understand the kinds of investments you can make and the risks and rewards from each.

Appreciation and Rental Income

Perhaps the most commonly known methods of making a return on investment in the real estate market are through appreciation and rental income. Most homeowners rely on appreciation when they purchase their long-term home. Over the many years they live in the home, they expect the cost of real estate to increase, therefore increasing the value of their home. Upon retirement or any other life event, the home will ideally be worth more than was initially paid to acquire it. “This is the most common form of real estate investment,” says Machinga. “But it is very long term and limited in its potential for return, especially if it’s your home.” Appreciation can happen particularly if properties become scarce in the area or the neighborhood improves through additional shops, restaurants, and other desirable amenities.

Rental income is also a popular choice for a return on a real estate investment. It can be done on both small and large scales through individual units or through entire buildings. “The general principle is to purchase property that can be rented out — whether it’s residential or commercial,” says Machinga. It is important to run your numbers before making this type of investment. Make sure you can turn a profit after the cost to purchase (or your mortgage payment), property taxes, and other costs like insurance, repairs and maintenance and upgrades. “This type of investment can require a lot of research, but can also provide steady cash flow which is really attractive to many investors,” says Jarod Machinga.

The Pros and Cons

No matter what type of investment you make, there are pros and cons. In real estate, the pros are plentiful. Generally speaking, the market is less volatile than other types of investments like the stock market. It can also provide you with steady cash flow, particularly if you are in the rental market. An added bonus for commercial and larger residential investments is ancillary income such as from vending machines in office buildings or laundry facilities in apartment buildings. You can also benefit from many tax breaks such as deductions for interest payments on mortgages, property taxes, and depreciation. Overall, the long-term return on investment is normally quite positive, as is the case for many people who buy and maintain their own home.

The cons for real estate investing are considered minimal for many but are nevertheless important to consider. As Machinga notes, investments require capital in the form of down payments to get started. These can be difficult for some people to come up with, depending on the market they intend on entering. It is also a less liquid investment, requiring real estate agents and other professionals over the course of several weeks to months in order to move, as compared to the stock market. Finally, if dealing with tenants and building issues is unattractive to you, then this should be a negative consideration as well.

For Jarod Machinga, investing in real estate and working on property projects is a passion with stable and profitable returns. Armed with the right knowledge and attitude, it can be for any investor. “The key is to do the research and understand what you’re committing to,” says Machinga. “But if it’s right for you, it’s a great way to get involved with your own portfolio.”

Jarod Machinga — Founder of JAMAC. Hopewell, New Jersey.