Despite the volatile real estate market, experts still believe that real estate is a worthwhile investment in 2022 and going into 2023. Have you considered becoming a real estate investor?
There’s no time like the present to start investing and protecting your financial future, so what’s stopping you? It might seem complicated, but investing in real estate isn’t as hard as it looks.
We’re here to talk all about it. Read on to learn how to invest in real estate.
Start by Learning the Basics
If you’ve decided that it’s time to learn how to invest in real estate, you need to do your homework. Luckily, you’re on that step right now. Even reading this article shows that you’re doing your research, so you can hit the ground running (so to speak) when you finally invest.
Learn about the real estate industry. Consider taking a few classes if they’re available to you. You can also find free or paid online real estate classes so you can learn on your own time.
This may seem tedious, but it will help in the long run.
Understand the Local Housing Market
While you’re still in the “research” phase, start learning about the local housing market. If you plan on flipping a property to sell, look at local housing prices. If you’re refreshing an old building to rent out instead, check out the rental market.
This will help you determine when, where, and if it’s advantageous for you to start your real estate investment. Remember that timing your investment is crucial. Investing at the wrong time can make the process much more difficult.
Look at different neighborhoods in your local area to see which ones seem best for property investment. Check out current real estate trends and try to gauge what the future holds. Remember that areas that may not seem ideal now may be “up and coming,” which makes them great for investing.
You should look at local housing and rental amenities as well as the amenities in each individual neighborhood. This may seem like a lot of work, but it can help you earn more money in the future and make better investment choices.
Know Your Budget
How much are you able to spend on your investment?
You need to think of your real estate investment as a business. This is a business budget. Break your budget down into categories to determine how much you’re actually able to spend.
How the budget breaks down will depend on several factors. In general, you might be considering things like:
- The initial cost of the property
- Necessary repairs
- Upgrades
- Extra real estate fees
- Marketing
- The cost of property management services
Everyone’s cost breakdown will look different. It’s always best to have extra room in your budget for unexpected expenses. For example, you may think that a home only needs minor repairs but later discover that there’s water damage.
If you’ve used your entire budget, that will throw you off. If you have extra room, it won’t be as big of an emergency.
You can start investing with a small budget, but the more money you have, the easier it will be to buy and flip a good property. You may need to get a loan to get enough startup cash.
Choose Your Investment Types
What type of property do you plan on investing in?
First, choose between a commercial property and a residential property. There are pros and cons to each type of investment, so again, you’ll want to do your research first.
If you choose a residential property, decide if you’re going to do a single-family residence or a multi-family residence. Again, there are pros and cons to both, so there’s no “right” answer.
If you have a large enough budget, you can diversify your investment and try several different types of properties. This is just your starting point.
Network With Other Investors
Networking with other investors can be beneficial when you’re first starting out. While they are your direct competitors, remember that everyone needs housing. Someone else’s success will not equal your failure.
Experienced real estate investors have a lot of wisdom to share with you. They can offer insight that you can’t get from the web. Local property investors may be able to connect you with property management companies, realtors, maintenance professionals, and more.
They may even turn into investment partners.
Find a Property to Purchase
Finding your first investment property is exciting! Make sure that you choose carefully.
A property that’s in a good area and in perfect condition may be too expensive for investment. You want to be able to make money on the home, so especially if you plan on flipping it and selling it right away, you need to be able to make profitable improvements.
Look for properties that need upgrades and minor repairs. If you’re very handy and have plenty of experience in home renovation, you can opt for a property that’s in disrepair as it will be more affordable. Keep in mind that the money you save on the initial purchase may not be worth the cost of repairs.
Consider Repairs and Upgrades Carefully
Speaking of repairs, consider your repairs and upgrades carefully. Not every upgrade is beneficial.
All serious repairs need to be done before you sell or rent out the home. The home should be safe and habitable. Beyond that, you have options.
Will you upgrade the appliances for lower utility costs, lower maintenance costs, and a better sale or rental price? Will you add a new feature, like a washer and dryer, to earn more money back?
Upgrading kitchens and bathrooms is often profitable, but serious upgrades can cost more than they’re worth.
Are You Thinking About Becoming a Real Estate Investor?
Becoming a real estate investor is more complicated than just buying real estate and selling it for a profit. This is a business and you need to treat it as such. This quick guide should help you get started, but you still have a lot to learn!
If you’re in need of real estate funds for your new investment, we want to help you. Contact one of our loan officers so we can start working together today