A simple definition of real estate investing is purchasing and managing property for rent or sale to get a profit. Investing in real estate can be a very profitable investment and can even be taken on as a full time career or as passive income. Are you interested in investing in it? Not sure where to start? Keep on reading to get some vital tips!
FIGURE OUT YOUR STRATEGY
First thing you need to do is figure out your investment strategy. There are many ways that you can start and go about it. Some investors fix and flip to sell the home, others find a property that requires no fixing and rent it out to a tenant, and others may sub-lease a room in their home to use as airbnb income. You can even purchase a multi-family home and live in one unit and rent out the other (commonly referred to as house hacking.) There are so many ways to go about real estate investing, and knowing what strategy you want to follow is a vital step to guide you through the process.
INVEST IN EMERGING NEIGHBORHOODS
Another tip is when looking for properties to purchase, search for emerging neighborhoods, so that the property you buy increases in value as the area develops. For example, if you buy a property in a neighborhood that is just being built, a couple years go by, now the neighborhood is fully developed and maybe a huge plaza was built nearby, which in turn, increases the value of the entire area. This results in tax incentives and maximizing your profit. Also, know the areas that you are purchasing properties in. Research what is around it, the crime rates, the population growth, how many homes in that area are on the market, etc. Having this knowledge will help you pick the best investments.
JOIN A NETWORKING OR INVESTMENT GROUP
Surround yourself with people that have a similar goal as you, because they may have more knowledge and experience to pass on. Not to mention, they will know the ins and outs of the market and give you insight on how to succeed. This is a good way to pave the same path for yourself.
SET A BUDGET WITH A RAINY DAY FUND
Have an idea of how much you want to spend, and have money stashed away for a rainy day. The last thing you want to do is go broke, or lose out on money. For example, lets say you are interested in a fixer upper and you want to purchase it with an FHA loan. Save money for the down payment and other closing fees, lets say 10% of the purchase price, and get estimates on the major things that need to be fixed, or just do your research and get a rough estimate. Once you add up everything you want to repair and the estimated cost, add on another 5-10% just in case it goes over and use that as your budget.
KNOW WHEN TO OUTSOURCE
You can be a jack of all trades at the beginning, but once you get to a point where you own multiple properties, it can become too much to handle. Don’t spread yourself too thin and know when to outsource work to buy some of your time back. Time is money, and a nonrenewable resource. Don’t give it away if you don’t have to.
BUILD YOUR TEAM
So you want to have a couple important people on your side when investing in real estate. These people would include a real estate agent to help you with the sell and purchase of properties (we have some amazing ones here at Premium Properties that have experience with real estate investors!) , a lawyer that specializes in real estate, people that can help you with repairs, and maybe a property manager once you start outsourcing your workload. Your support team will be the backbone of your investment company, so choose these individuals wisely.
Real estate investing can be a great source of income, whether to supplement your main income, or as a full time gig. At the end of the day, staying educated will be your best guide to making decisions. Now get out there, and start investing!