Real estate investing is a broad field, which can be overwhelming to beginners. Many new investors fail because they jump into the business without good preparation and knowledge. However, those who become successful often have the habit of asking real estate questions. It is almost impossible to know everything about real estate investing when you are just getting started. However, by asking questions, you get to learn from those with experience and also familiarize yourself with the latest trends. You will also be able to avoid unnecessary mistakes that could be costly.
Some real estate questions come up more often than others. So before you jump into the real estate investing field, it is good to familiarize yourself with the answers to these questions. Here are 20 common real estate questions asked by new investors.
Related: The 6 Most Important Questions in Real Estate Investing
1. How do I determine the value of an investment property?
This real estate FAQ is common among new investors looking to buy an investment property. The value of a real estate property can be determined using a number of methods. However, the most common method for determining how much a property is worth is by conducting comparative market analysis. This is an in-depth examination of recently sold similar properties in the same area. You can find real estate comps using Mashvisor’s investment property calculator.
2. What is the best real estate investment strategy for me?
This is also one of the common real estate questions that new investors ask before getting into the business. Real estate investing offers many property investment options. As a result, many beginner real estate investors tend to be confused about which strategy to use. However, the best real estate investment strategy for you will depend on the amount of time and money you are willing to invest. It is also important to consider your long-term real estate investment goals.
3. How do I find a profitable investment property?
To be successful in real estate investing, you need to know how to find investment properties that are profitable. To do so, you need to thoroughly evaluate the city, neighborhood, and investment property. However, this process is a bit complex and time-consuming. You can turn to Mashvisor’s real estate tools to quickly and accurately perform real estate market analysis and investment property analysis to locate profitable investment properties around the US.
4. Can I begin investing in real estate with no money?
There are a number of options when it comes to investment property financing. However, not everyone can qualify for a conventional mortgage because you will need to have a sufficient down payment and meet other requirements. If you can’t buy in cash or don’t have enough money for a down payment, you will need to be more creative. There are a number of ways for new real estate investors to get started with little to no money down. Here are some strategies you can consider:
- Real estate partnerships
- Hard money or private money loans
- Seller financing
- Home equity loans
5. Is real estate investing easier if I already own property?
Real estate investing for beginners is easier if you have equity in an existing property. This may be another investment property or your family home. With an already existing property, you may use it to borrow more and build a substantial real estate investment portfolio much quicker. However, it will ultimately depend on your investment goals and personal financial situation.
6. Do I need a real estate agent when buying a property?
You can buy an investment property by yourself. However, it is strongly recommended that you work with a real estate agent, especially if you are still new to real estate investing. Without an agent, the process can be quite rigorous and time-consuming. An agent will walk you through the whole process of buying a property and ensure that you comply with all the requirements. They will help you to evaluate markets, get pre-approved for a loan, find an attorney, negotiate a deal, close a deal, and much more. However, be sure to properly interview prospective agents so as to choose one that is experienced and a good match for you.
7. How can I learn about real estate investing?
Real estate education is critical to successful real estate investing. You need to be conversant with different aspects such as property search, analysis, financing, tenant screening, etc. However, this doesn’t mean that you need to go to college to learn about real estate investing. There are several other sources you can use to learn the real estate basics, both free and paid. In our age of technology, anyone can access information on real estate investing. Some of these sources include books, podcasts, blogs, newspapers, etc. For example, you can learn more about real estate investing through Mashvisor’s blog for free.
8. Should I invest in out-of-state properties?
As a beginner real estate investor, you should consider purchasing an investment property that is close to your home. It will be easier to deal with your service providers and tenants if the property is within driving distance. It is advisable to invest in an out-of-state property only after gaining enough experience. Having said that, it may at times make more sense to invest in an out-of-state property. For instance, you may find that homes in other parts of the US are more profitable or more affordable than those in your area. It is important for you to do thorough market research and weigh your options before you choose where to invest in real estate.
Related: Step-by-Step Guide to Out of State Real Estate Investing
9. How will I determine the rent to charge for my property?
This is also one of the important real estate questions every investor should know the answer to before advertising their rental property. The rental value of a property is critical. If over-estimated, the property may remain vacant for a long period of time. If it is too low, it may result in negative cash flow. To get a fair estimate of the monthly rental value, you will need to look for comparable properties (rental comps) in the area to see what they are being advertised for. You should also consider the local market conditions.
10. How do I find the right tenant for my rental property?
The quality of your tenant will influence the success of your business. The right tenant is one who takes care of the rental property and makes rent payments on time. To find a good tenant, you should conduct thorough tenant screening. Ensure you conduct identity checks, check their credit history, and rent payment history.
11. Who pays the utility bills?
Utility bills such as electricity, gas, water, and telephone are typically the responsibility of the tenants unless all bills are included in the rents. It is important for the landlord to mention this in the tenancy agreement to avoid any future misunderstandings.
12. What if the tenant causes damage to my property?
This is arguably the most common worry of rental property owners. Consequently, it is one of the most frequently asked real estate questions. To reduce the risk of property damage, the landlord should collect a security deposit when the tenant moves in. The deposit will cover any damage and also remind the tenant to ensure that the property is in the condition they found it when they move out. If the tenant doesn’t pay for the damage when it occurs, the cost of fixing it will be deducted from the security deposit when the tenancy ends. However, the landlord should allow for fair wear and tear.
13. What if the tenant refuses to pay rent?
If the tenant refuses to pay, you can issue them a notice to leave the rental property. Any outstanding rent can be sought through the court. As a precaution, you can take out rent guarantee insurance to insure yourself against rent nonpayment. The insurance company will pay the rent for up to a specific number of months in the event that the tenant is unable to pay rent for any reason. Upon application, you will receive a policy document that sets out the terms and conditions that you must abide by.
14. Should I make any improvements to my investment property before renting it out?
It is always good to rent out your property when it is in good condition. Rental properties that are clean, have good painting, and modern accessories will rent quicker and at a better price. However, you shouldn’t spend too much money on upgrading the property. Only make improvements that will increase the value of the property without costing too much money.
15. How long does it take to get a return?
Most new property investors who ask such real estate questions are often looking for a way to get rich quick. Real estate investing can be a profitable business. However, it generally won’t make you rich overnight or even over the course of a few months. You will need to not only work hard but also be patient before seeing big returns. Your returns will also vary depending on your strategy and market conditions.
16. How can I maximize my investment property profits?
Owning an income property is all about making as much profit as possible. Even though market conditions will have a significant influence on property value, there are some factors you can control to increase the profitability of your investment. Here are some simple ways to increase the profits of your investment property:
- Set competitive pricing
- Screen tenants to minimize unpaid rent and property damage
- Provide additional services at a fee
- Stay on top of maintenance to ensure the property stays in tip-top shape and to avoid expensive repairs
- Upgrade your property through renovations
17. How much will I need for closing costs?
Closing costs are fees that accompany the purchase of a real estate property, such as home inspection, appraisal fees, and attorney fees. These closing costs usually range from 2% to 5% of the investment property’s purchase price.
Related: Investing in Real Estate: What Are Closing Costs?
18. Should I hire professional property management?
Owning an investment property comes with some responsibilities. You will need to find tenants, do maintenance and repair work, address issues raised by tenants, deal with taxes, etc. You can choose to do all these tasks on your own or hire a professional property manager. However, the choice to hire a property manager will depend mainly on your budget and time availability.
19. Do I need a home inspection?
It is important to get a home inspection on the investment property you want to purchase. A home inspection done by a qualified professional will help you find any problems with the property that need to be fixed. With this knowledge, you will be able to avoid unwanted surprises and you can even negotiate for a lower price.
20. What do I need before getting into real estate investing?
Even before you start searching for your first investment property, you will want to secure enough capital. You should also try to learn as much as possible about real estate investing. Attend seminars, buy books, read real estate blogs, etc.
The Bottom Line
When getting started in real estate, you need to be well prepared and educated. After reading the above real estate questions commonly asked by new investors, you should now have a better understanding of what to expect in your real estate investing journey. If you are unsure about something, never hesitate to ask. By asking all your real estate questions, you will be able to improve and get ahead of your competition.