|Real Estate Developer & Entrepreneur A. Donahue Baker|
By Erickka Sy Savané
There are people who do their jobs and there are those who are passionate about their work. Entrepreneur and real estate developer A. Donahue Baker has built an impressive real estate portfolio of over 400 residential units nationwide, and he’s passionate about providing minorities and Millennials with the strategies they need to build wealth.
According to the New Jersey native, there are only two options to build generational wealth: real estate or starting a business. Millennials- side hustlers that they are- are starting businesses at a rapid rate, but few want to be home owners due to a variety of perceived myths. In fact, 60% of Millennials choose to rent, according to Goldman Sachs.
Fortunately for us, A. Donahue took time out of his busy baller schedule to dispel some of the myths about home ownership, and provide us with the proper information we need to do it the right way!
How long have you been in real estate and why did you choose it?
What don’t black Millennials know about real estate?
Black Millennials know about real estate but they lack the foundational knowledge to build generational wealth through real estate because of the trend to rent as opposed to owning. Renting is an expense that once paid by the renter that money is gone forever. Paying a mortgage is different. It’s like making a loan to your future self. It becomes a case of ease in the short term since it’s easier for them to rent. However, renting is not always best for black Millennials from a long-term perspective because owning is one of the primary ways in which generational wealth is created and sustained in the black community.
What are the misconceptions we have today about owning a home?
Many people, Millennials included, think owning a home is an asset. It is not. Owning a home such as a duplex where you live in one side and rent out the other to a tenant that pays your mortgage is an asset. A home that takes money out of your pocket every month is a liability. Millennials need to look at homes and think ‘how can I re-engineer the process to get others to pay for the home and allow myself to build wealth?’ The answer to that question is seeking multi-family properties. I think people that live in urban areas like NYC or LA sometimes have given up hope of owning a home (much less multi-family homes) due to the high prices in those markets. I think those are false misconceptions. The prices may be high to the general public, but I show people how to purchase properties for pennies on the dollar in any market. Especially if you are an owner-occupant you have an advantage over professional investors like me. For example, famous breakfast club radio personality Angela Yee purchased a brownstone in Brooklyn, NY. For the price she paid for her brownstone she could have purchased a super sexy single-family house in New Jersey. The decision she made basically will make her a millionaire because she delayed the gratification of owning a sexy single-family house and purchased the multi-family brownstone. She rents out the apartments to tenants that will cover the cost of the mortgage, which will eventually deliver her a paid off brownstone all while she lives rent-free in one of the units. If this strategy can work in NYC it can work anywhere.
When should you buy a home?
I believe everyone’s first home should be an FHA financed multi-family home like Angela Yee. If you are after generational wealth via real estate your own single family personal home should be made when you have achieved the passive income goal you desire to create. So it actually is best to wait to buy your own personal home after you have created a steady income stream. Many people don’t understand why this is important. The reason why it is important is that it’s easier to purchase a four family as your first purchase via a FHA loan, which is a loan anyone can get (taking into consideration they meet the program’s guidelines) with 3.5% down payment, than getting an FHA loan after you already own a single family home. The degree of difficulty is steep.
What are some of the barriers in terms of being black and buying a home?
Really home buying is a mental sport. You have to be disciplined and able to delay gratification. Many people think of home buying as just picking a house they like in a neighborhood they like. Being black and buying a home is just like being white and buying a home. You have to be able to make the biggest investment of your life with a lot of forethought of the future. How does the investment affect my family, career, and net worth?
Read Part 2 here!
A. Donahue will talk about the best neighborhoods Black Millennials should buy, gentrification, how to spot a bargain and more! For more information visit A. Donahue’s website, www.adonahuebaker.com or follow him on twitter and Instagram.