Some people are deterred from real estate investment because it seems like an expensive investment choice. For many years this was true, but it no longer is. What matters more than anything is that you have a solid financial plan.
Real estate investing has a great potential for high returns compared to other investment opportunities. It allows for profit, leverage and control over assets, and the ability to expand your financial portfolio. To stretch your dollar further, and invest despite little capital, there are a few points you must consider:
It is easy to fork out a great deal of money on expensive real estate seminars. However, you need not incur that expense to be successful in real estate. The basics of real estate transactions are easy to grasp with proper research.
There are a variety of useful guides online such as real estate books, podcasts, and articles. Free resources can offer you significant insight into buying real estate and selling real estate for investment.
Another resource is other investors in your target market. They can provide you real life information on the current investment climate, resources about contractors, practical information regarding flipping and property management, and a host of other considerations.
2) Property Types
When you are buying or selling real estate, there are a variety of property types to choose from. These include:
- Vacant land
- Multifamily rental properties
- Mobile homes
- Single-family homes
Commercial real estate and notes are viable if you have the aptitude to manage them wisely. Once you have researched and familiarized yourself with the advantages and drawbacks of each property type, you will want to understand how to properly evaluate neighborhoods.
3) Identify Goals
After you have done all your research, you should have a good idea of the amount of money you will need to invest to get started with various deals. It is possible to invest for as little as one thousand dollars, or even less. However, you will need to ask yourself how much work you want to put in and how much risk are you willing to take.
4) Down Payment
If you are considering investing with little monetary output, you must link with an entity that has the ability to furnish purchase money for your investment – be that financing real estate with a bank or investing via crowdfunding. Either way, you will need a down payment of some sort. Almost everyone has disposable income.
You may have to get another job, give up coffee, cable, or nights out, but the idea is to work toward the end goal. While you can break into real estate investing with little money, you can’t do it without sacrifice. Once you have gained success, you can reward yourself in bigger and better ways
5) Pinpoint Investment Options
So, you have done your research, know how much money you need, and have sacrificed your time and comforts… Now what? It is time to look into your investment options:
Traditional Real Estate
Traditional real estate investing is buying real estate and renting it out. It is a good way to build wealth. However, you will have to scour dozens or even hundreds of listings and visit many properties before you find one ideal for your investment needs.
You then will have to find good tenants and show the property. Not to mention maintenance, property management, and legal fees in the event of evictions or other legal matters. If you occupy the home yourself, the mortgage can become a liability with greater risk during a depressed market.
Crowdfunding is ideal for people who are not interested in owning and managing their own property. It allows you to grow your portfolio through real estate investing with far less hassle. You will also be relieved the responsibility of worrying about property loans.
With crowdfunding, you join a group of other investors and lend or invest your pooled money with more experienced investors. Done wisely, you can reap the benefits of their knowledge. The statistics and management of your investment are assessable online.
The biggest cautions with crowdfunding are:
Carefully researching the company, making sure it is legitimate, and a good fit for you.
Knowing what the investment floor, guidelines, and fees are
Knowing how long they have been in business
Taking all those things into consideration will help you determine if a particular crowdfunding opportunity will be right for your investment needs.
6) Risk Assessment
Whether you are financing real estate on your own or crowdfunding, your investment will come with risk. The most obvious risk is that you could end up selling real estate for less than its purchase price. Market conditions, unforeseen repairs, and factors out of your control can change a seemingly solid investment bad.
Also, timing plays a factor in your risk. If you find yourself selling real estate just before the market takes an upturn, or selling too late, you could lose potential profit. Along the same vein, you could end up paying more for a property because you waited too long to purchase.
7) Tax Implications
You should have researched the tax implications of certain property classifications early on. You do not want to lose money on large tax payments that can be avoided or minimized. Sort out the tax liability of an investment opportunity early on, so there are no surprises. Checking current tax schedules and speaking to a tax professional are the best ways to ensure you are clear on where you will stand.
Real estate can be a sound investment choice, but you need to be willing to make the sacrifices, do the research, and have the consistency needed to wisely approach the opportunities of the market.