There is no doubt that real estate investing is an excellent way to grow wealth and secure a stable passive income. If you are thinking of undertaking this profitable venture, here are a few great tips to get you started.
7 Ways to Get Started in Real Estate Investing
The first step you need take is to examine the different real estate investment types at your disposal. Any experienced property management company will tell you that there are four main investment options you can consider. These are the rental properties, real estate investment trusts, real estate investment groups, and home rentals. Each of these has unique entry requirements, benefits, and challenges. Rental properties, for instance, involves being the sole landlord of a condominium, home, or apartment. R.E.I.T’s, on the other hand, involves purchasing ownership shares from finance income-producing real estate investment companies. Take your time to find out which among these options works best for you and learn as much as you can about it.
Decide what you want
Since there are various real estate opportunities in the market, you need to determine what kind of investing you want to do. Either you can get a property from which you will be earning a recurrent monthly income, or you could decide to buy the asset, renovate it, and flip it to make a one-off profit. Both of these options are rewarding, and it depends on your objective.
Consider your strengths
Any prudent investor will conduct an objective self-evaluation to determine whether they have the time, skills, and resources to undertake and manage such an investment. You too should do the same. Such an assessment will help you to determine whether to go for a direct individual ownership, hire a property management company, or to consider alternatives like partnerships, and Real Estate Investment Trusts. If you possess the time, skills and means, going it alone might be a rewarding experience. However, if you wish to benefit from others who have similar investment interests, partnering might just be the way to go.
Determine how much you intend to spend
Once you have settled on the type of real estate investment, you should decide how much you want to spend on it. It is to your benefit if you set up an investment budget estimate to guide you on what to buy. Be objective and realistic at this stage and only work with what you can afford. Many first-timers are blinded by the prospect of making huge returns, to the extent that they end up allocating more than they can afford. Consequently, they fall into massive debts, which they will struggle to pay throughout the life of the investment. Bear in mind that real estate options come in a myriad of sizes and costs. Hence, there is no need to get into unmanageable debt just to become a property owner.
Assess your financial situation
When purchasing real estate, you have two distinct funding options self-funding or getting a financier like a mortgage facility. In most cases, a banker will require that you have at least a twenty percent down payment of the investment’s purchase value. If you have the means, or you do not wish to be tied up with loan repayments, you should wait until you save up enough cash to meet the purchase cost. Even though it might take some time for you to amass such enormous amounts, in the end, you will not have to split your rental income to offset the interest-tied loans. However, if you prefer getting funds from a financier, make sure you get an offer that works in your best interest.
Investigate the people you trade with
Whether you opt for individual real estate property ownership, or you prefer a partnership, it is critical that you do a background investigation on all stakeholders. These include the one selling the property, as well as your potential partners. The biggest mistake you can ever make is to be naïve and trusting. Irrespective of how trustworthy and likable a person is, due diligence is a must. You should ascertain whether the person has the rightful authority to sell the property, is credible, and if the property has all the necessary documentation.
Be prepared for eventualities
Even though real estate is not as volatile as investing in stocks and securities, it is not devoid of challenges. Hence, you must prepare well for any unforeseen shortcomings. For instance, you need to set aside a little cash to cushion against investment-related expenditures that may arise. Similarly, you must be ready to face head-on, any challenges that might occur. This includes delayed paperwork, changes in state legislation, or revision of housing codes.
Investing in real estate is truly a viable venture; you only need to have adequate information, skills, and resources to go about it. Fortunately, with the help of an experienced realtor or property management company, you can quickly embark on a rewarding experience.