To many, real estate investing poses a fascinating, yet seemingly complicated road to wealth building. TV shows detailing the lives and success stories of mega house-flippers make the dream even more appealing to the throngs of individuals looking to break into this lucrative field. As with anything, the challenge is to get started and maintain momentum.
Fear not, breaking into the world of real estate investing is not as unattainable or as complicated as many think. The key is to become informed, prepared and take action.
Know Your Goals To Get Started In Real Estate Investing
When eyeing a property to select for your first real estate investment, it is wise to start with the basics, choosing one that is going to result in a legitimate cash profit. This may seem obvious but is common for new investors to focus more on long-term revenue than on immediate returns. Down the road, once more experience has been gained, consider choosing real estate investments that are a mixture of cash flow properties and future revenue producers.
Starting out, make an honest risk assessment and choose reliable options (i.e., a middle-class investment property) that result in continuous cash flow. This is the foundation of creating strong financial capital throughout your real estate investment journey.
There is no better way to learn the business than to consult with someone who is already in it. Some investors choose properties in their location; others buy outside of it. Consider consulting a property manager without a vested interest involved who can provide an objective estimation of the real estate you are about to purchase.
If you know someone who is already established as a real estate investor, do not be afraid to ask questions and advice. Whether you are able to actually join forces with an established investor whom you trust in order to learn the ropes, or simply pick their brain, the insight to be gained is invaluable. There is nothing the matter with asking for help and turning to seasoned professionals for wisdom throughout the process of learning real estate investing. They have walked in your shoes and understand better than anyone all that is involved.
Relationship building plays an integral part in wealth building. Forming trustworthy, solid connections with the individuals, you will be working with during your real estate investing journey (i.e., other investors, property managers, contractors, brokerages, agents, tenants) will enable you to build a strong, successful business.
Know Your Budget And Strategy
When you have narrowed down your property choices to a few, viable options, take the time to examine them against one another. Are there any renovations that will need to be made? What are your projected costs and profits? Are there any current leases involved that will impose barriers down the pike? What is the market value of other properties in the area as compared to the price you will be paying?
Whatever your personal budget for real estate investing may be, these are all important factors to weigh. In addition, it is always a good idea to consult with the local city administration to ensure there are no new building expansions or road alterations set to occur.
There is the question of what improvements, if any, ought to be made, and what purpose the investment will serve. Will you be renting the property out or do you plan to list it on the market? If the investment is going to be a long-term rental, consider making renovations with simpler, sturdy materials. When you plan to list your house, examine other properties on the market in the same neighborhood for comparison purposes so you can assess the value and what would need to be refurbished for resale.
It is also important to be equipped for unexpected financial costs that can and do pop up throughout the process of real estate investing. Any renovations aside, there are costs to maintain the property, as well as local city, county and capital gains taxes.
Real estate investing is an incredible and worthwhile venture. As a new investor, knowing your budget and sticking to it greatly reduces the chance of unwelcome surprises down the road and allows you to work within a defined financial framework.
Set Boundaries And Prepare
In real estate investing, as with any other business venture, it is crucial to prepare for the most positive outcome. With that said have a contingency plan for unforeseen issues. Study the rental and resale market. Calculate what your outlay and return on investment will be if renovations are required, and the rental or sales price has to be dropped.
Put everything in writing. Any agreement, contract, or additional commitment should be written out, signed and saved. Make sure you have received the security deposit or rental deposit for a property before releasing it over to the new owner or tenant.
Trust but verify. For example, if you are interviewing tenants for your new rental property, use the legally available resources for tenant selection to review credit reports or criminal reports. Know who you will be renting to so you can ensure that you maintain a profit whilst covering the costs incurred in maintaining a property.
Educate yourself as much and as often as you can. Study your real estate investment options. Avail yourself of books, podcasts, and web resources. Learn different strategies for real estate investing and decide what is of most interest to you.
Above all, study the real estate market in the location you plan on investing in. Learn it inside and out so that you are prepared and knowledgeable in making and closing deals.
Start Your Real Estate Journey
Real estate investing is an exciting and multifaceted business venture. It requires drive, determination, and diligence. There is limitless potential for success and investors can carve their own niche in the industry based on their personal preferences and property interests.
Start out small and work your way up. Never be afraid to ask questions or ask for help. Learn from your mistakes. Set your strategy and begin your real estate investing journey and the road to wealth building today.