Real estate nowadays is one of the greatest investments that you can make, with real estate your money is secure being tied up to a tangible asset that could greatly appreciate in value. Rental properties are known for their steady cash flow with minimal effort because people will always need a place to live.
But of course, like any other type of investment you need to be equipped with the right tools, information and resources to do it right; in this article we explain 9 tips and advices for you to start on the right path.
The first step on your path is to become familiar with the jargon (lingo) that is used in the real estate industry; reading a couple of books or taking a real estate course could achieve this.
One thing to keep in mind though is that you don’t want to follow the “get-rich-quick” gurus that will only give you false hopes and expectations, while making themselves a profit in the process. Often these ‘experts’ often have limited experience with real estate markets instead offering second hand information with little proof of success.
Budgeting and Financing
An important aspect to consider before making any investment decisions is to collect the following important questions: What budget do you have? How much money do you have for a down payment? What qualifications are need to apply for investment financing?
Don’t forget to account for money to cover your closing costs, carrying costs and any maintenance costs that could be incurred.
Socialize with Industry experts and influencers
You need to grow a network with experts in your industry to get ball rolling, one way to do that is to speak to someone who is knowledgeable in real estate investing, this person could be anyone from a real estate agent to a successful landlord that you can get in touch with.
Offer to buy them a cup of coffee sometime and ask them for tips for a beginner real estate investor, inquire about how they started their journey in the real estate world. Most will be more than happy to share their experience and success stories.
Follow the rules
This isn’t the most fun part of investing in real estate but it’s a must to have basic understanding of local real estate laws, there are many resources that you can get your hands on that will guide you in the right path, try by talking to your local real estate agents, they will know the ins and outs of any area specifics.
Explore on your own
Information is plentiful nowadays on the Internet and you can likely find the information most suitable for you with a little searching; a good place to start could be the MLS or for more precise and detailed information you could use theMashvisor App.
Another approach to expand your knowledge is to take a walk around neighborhoods that you are interested in to get a sense of the local market. The more information you have, the better investment decisions you will make.
Location is one of the most important factors to take into considerations, if your in-state real estate properties don’t satisfy your goals, go ahead and look at other out-of-state options. This might be most relevant if you are hoping to invest in a geographical area of interest, a university town or city known for real estate. However, be aware that this can make it more difficult to monitor the condition of the rental in-between tenants.
Related: Investing in the Right Neighbourhood
Consider cash flow
A beginner real estate investor needs to put cash flow as a priority when compared to long term real estate investing. As a beginner, consider buying properties that will get you a steady stream of cash, look for something that will get you the money now.
Building a significant real estate portfolio requires that assets pay for themselves plus giving you a substantial surplus to warm your pocket. Real estate costs are more than just a mortgage payment; here are just a few of the costs you will face
1-Vacancy rates – 5-20%
2-Property management fees – 8-10%
3-Maintenance and repairs — $500 to $2000 annually
Create a Plan
To invest in real estate you need to have a plan to guide you along the way, this plan doesn’t need to be filled with details that will confuse you, just write down a few basic guidelines and follow them, priorities should include how much you are willing to spend, the type of investment you will buy, decide on the minimum ROI that you are willing to settle for. Lastly, its good practice to write down short term and long term goals.
Do the math
Planning must include some accurate and realistic numbers to base your assumptions and goals upon. A few important variables to include in your plan are return on investment, cash flow, rental income, cap rate, rent change, and property tax. These factors are crucial for making the right investment decision, if getting these numbers isn’t your biggest joy or you simply don’t have enough time for it just go to the Mashvisor app to access all the information.
Which one of these tips do you have the most trouble trying to figure out?