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Thinking about becoming a real estate investor? Good idea!
Forbes counted real estate as one of the top four investments to make in 2018.
Real estate can be a lucrative way to invest your money and keep your cash flow strong. But there’s a lot to learn and it can be a risky investment if you aren’t knowledgable on the subject.
Read on to learn what you need to know to invest wisely and come out on top.
Before you get started, it’s important to have a clear understanding of why real estate is your investment path and what you hope to get out of it.
Obviously, we all want to make money off our investments, but we can’t predict the future of real estate one hundred percent. So why invest here?
This high-risk investment is done with the goal of making serious money over time. As with any investment, the dollar amount you make back correlates with the amount you put in, and buying real estate isn’t cheap.
You have to be prepared to take on the role of landlord and ensure you make enough profit to cover not only the home itself but taxes, insurance, and any necessary repairs.
While this is a lot of responsibility, the rewards are well worth it.
With smart investments, you can make a real profit off a piece of property, keeping it your family for generations. Or, you can turn around and sell it, then continue to grow your income and make bigger investments.
How to Make Money
There are several ways to approach investing in real estate and they can each be equally lucrative. It just depends on what you feel most comfortable with, how much risk you’re willing to take and what your cash flow is like.
Wait for Appreciation
This method is a little risky and will take some time but can be well worth it in the long run. This is when you purchase a property and wait for its’ value to increase.
The increase in value can be due to the growth of the area. Perhaps the neighborhood becomes a hot market and the prices of property begin to rise. The other way to increase value is to make improvements to the property over time.
This method is when you buy a property that you can rent out and have constant cash flow. It becomes an income property because you’re making money off your investment right away once it’s rented.
This type of investment can be used for residential property like homes or apartment buildings as well as commercial property like storefronts or office space.
This is when someone is able to make income based on extra money a property generates. If you’re a broker, you can make a commission when a property is bought or sold.
If you run a property management company, you can stand to make a profit off of several properties at once. Property managers usually take a cut of the rent income at an office building or residential property.
Knowing When to Buy
This can be the tricky part; knowing the difference between and good investment and a bad one.
When you’re searching for an investments property, it’s best to keep emotions out of the equation. When we’re looking for a home we’ll live in ourselves, we tend to lead with our heart and have an emotional response to the “right house”.
This shouldn’t be the case for an investment.
Do your research.
When you begin looking for your investment property, don’t rush the process. Have a checklist you reference for ways to evaluate if the property is indeed a good investment.
Some of those items can include the condition of the property and repairs needed and zoning issues or liens against the property.
Depending on whether it’s a commercial or residential property, you can also check on the school district and whether the neighborhood is becoming more popular and desirable.
You’ll also want to research comparables and get data on properties recently bought and sold in the area.
There’s a lot to learn when it comes to investing in real estate. It’s important to do your research and gain as much knowledge as possible before diving in.
Here are some tips to get you started:
Stick to Your Budget
Don’t let your feelings run the show when searching for your first property.
This is a business deal in which the goal is to make money. So, know your budget and don’t go over it. You don’t want to overextend yourself or get into a situation that makes you financially uncomfortable.
Do Your Research Ahead of Time
Before you close on a property, it’s important to do your due diligence. This means learning everything you can about your future investment.
You should request any information about the history of the property; problems and repairs made, along with information about any upgrades.
Determine how much your overhead will be and any other expenses like taxes, insurance and how much accessible money you’ll need if you do become a landlord and a tenant needs repairs in their unit.
Consider closing costs like escrow fees and inspection costs.
Get It on Paper
Put everything in writing. This is essential, especially when it comes time to leasing your property out to new tenants.
Any kind of transaction should be put into writing and kept for reference.
It’s a good idea to try to put correspondence into emails as opposed to verbal agreements or exchanges so you can always go back to figure out exactly what was said.
Become a Real Estate Investor Today
With the information above, you’re ready to become a real estate investor and start turning your money into more money now!
Do your research and approach your first purchase from a business standpoint so you’re sure to invest in a property that will pay off in the long run.
Check out the rest of our site for more finance tips!