Fifteen years ago, Melanie Montague was the fourth agent to sign on as a Keller Williams agent when the company set up shop in Annapolis, Maryland. “When I moved to Keller Williams, things started to flourish,” she says. As a real estate novice, Montague brought in $3M in volume and shined as Rookie of the Year. Today, alongside her team of seven, she brings in $26.5M.
Among fellow agents, Montague’s name is a familiar one. She has been on the ALC for more than five years, is an eight-time graduate of BOLD, and regularly teaches at her market center.
In crafting her success, Montague has added one powerful upgrade to her business engine: investments (a topic she also volunteers time teaching in Maryland). “I believe in the power of creating passive income and making money work for you,” Montague says. “So, it seemed logical to invest in an industry that I am familiar with.”
Once she found the right opportunity, she jumped headfirst. “One of my clients was an investor who taught people how to flip houses,” Montague shares. “I was their real estate agent, and after watching them, I went home and told my husband that we could do the same. We went to my client, enrolled in his course, did some work together, and flipped our first home.”
Here, Montague, who has been featured on an episode of “Beachfront Bargain Hunt: Renovation” on HGTV, shares her top tips for succeeding in real estate investing:Register for Mega Camp
Create Your Game Plan
Identify your why and what.
Before starting your investing journey, have a clear plan of the number of homes you want to invest in, how you will get to that number, and in what time frame. “This is where most fail – the leap of faith,” Montague says. “You cannot be afraid to take the jump. If you have done your risk assessment and everything looks good, you have to go for it.”
If you are new to investing and establishing your parameters, Montague suggests thinking about what you need to become your version of wealthy, or what you need to make per month in passive income from your home investments. From there, you gauge an estimate of the number of homes needed to make that a reality. “Based upon the location you are working in, you can determine a sales price,” she says. “From there, you need to figure out your cost of acquisition versus sales to get a percentage. This will tell you how many homes you will need to invest in per year.”
For Montague and her husband Shad, who is involved in the business, the magic number was 80 homes. “We determined what we wanted monthly off of long-term rentals, and we worked backward to establish a minimum profit per month from each home, which determined the total we needed to reach,” Montague shares. “We then created a timeline of how many to purchase per year.”
Stay in proximity.
Throughout your first investments, getting the hang of it might be a slow process. This is why Montague believes that agents new to investing should be physically close to where they plan on making their first purchase. ”It will make you more knowledgeable faster, and help you understand how your system is going to work and who you are able to trust,” she says. “And for flipping homes, being close helps you learn what the process looks like and where the mistakes happen.”
Build your arsenal.
For the Montagues, it’s all about the resource bank. In order to have an accurate grasp on their business, they:
- Rely on a trusted CPA/tax adviser who is knowledgeable about the real estate market
- Create a P&L statement in order to identify where they are making a profit and where there are opportunities
- Create cost spreadsheets for each individual home
- Have a reliable mentor
If you are just starting out with investments, they suggest:
- Joining a local real estate investment group
- Scouting the internet for investors you can learn from
- Interviewing a strong agent who can help you identify properties and sell them
It has to be about the numbers.
No matter how much you may like a home, if it doesn’t fit in with your long-term plan and budgeting, it should be a ‘no.’ “The purchase has to be about the numbers and it cannot be emotional,” Montague says. Always consider cash flow before getting ahead of yourself. Montague experienced this firsthand with a previous purchase. “We were thinking emotionally, because we loved that house and it was very expensive,” she says. “That set us back with investing because of a lack of extra money, and we had to take a couple years off.”
Juggle multiple projects.
To reach their own goals, the Montagues are constantly working on three to four homes – some with the intention of selling, others with the intention of renting. “For example, we are buying one house with the intention of flipping and selling. If we find something, say, in a beach area that is a good price, because the rental market is so strong, it makes sense to rent since the payoff would be higher than a mortgage.” As a general rule, for rentals, the team focuses on renovating smaller properties and making them aesthetically pleasing for potential renters.
Choose your criteria.
Before committing to a purchase, Montague looks at the following:
- How long it will take to flip the home
- A full market view at the moment of purchase (discussing with lenders about what they see)
- Figuring out the worst-case scenario for what she would be able to receive on the house at the end