Investing in real estate is a tried and true way to earn money over the long run. It should come as no surprise that there are over 11 million landlords across the United States, making real estate one of the most popular investments in the country.
Fortunately, you can benefit from their successes and mistakes. Here are some helpful tips on becoming a real estate investor in today’s world!
Benefits of Becoming a Real Estate Investor
Briefly, let’s discuss some of the key benefits of investing in real estate before we give our guide. We think some of them go overlooked in far too many discussions.
One of the most important benefits that is discussed is the ongoing, regular checks every month. Barring vacancies, you could earn up to 2% of your investment every single month, which is far higher than just about any dividend stock you’ll ever find!
However, one part that’s often overlooked is that, even with these ongoing checks, you’re building equity. If you’re paying down a mortgage, you’re increasing the resale value. Even if you bought the home in full, you’re earning those checks and still have the tangible asset to liquefy whenever you want.
In many cases, this can lead to a profit, even without purchasing any serious renovations. The market tends to trend upward over the long term, so while you write off “depreciation” to save on your taxes, you could actually build a solid retirement nest egg!
Also, you have total control over your investment. Can you think of any other investment that gives you 100% control after a 15% down payment? Real estate has the lowest barrier to entry of any investment, which is another reason millionaires still call it the best investment around!
Choose Your Type of Investment
First, you will need to choose which type of investment you want to pursue. There are plenty of popular real estate investment strategies out there, so you just need to choose the one that works for you.
You can flip outdated properties, rent them out, or flip them and then rent them out. You can rent them out for short periods like a vacation home or long periods like a traditional rental property. There are many ways to invest that can yield large returns if done properly.
Whatever your goals are, choose one as soon as possible. You’ll need to prepare financially and learn the laws in your area before pursuing it!
Save for a Down Payment
Start saving your money for a down payment, and try to keep an additional $10,000 on hand in case of emergencies. Develop a savings plan and stick to it!
Also, keep your credit score high! Even if you plan on buying the house in full, you may need to invest in repairs afterward, which may require a loan. Always keep your credit in good standing while pursuing a real estate investment!
Shop for Loans
Getting pre-approved for a loan can help smooth out the buying process, showing sellers that you’re serious and that you can easily make the purchase. If you have the funds already for a cash purchase, have a means of verification available to sellers.
If you’re shopping for loans, make sure you look for the best deals. This process can take a while, so start as soon as possible with some research, and limit your applications to avoid credit issues. If you find a 2% difference on interest, that’s a no-brainer, as that will save you thousands of dollars.
However, if two interest rates are quite similar, it’s time to read the fine print. A 0.2% difference won’t mean much if there are an overwhelming number of applicable fees. Always read the terms of the loan before signing anything!
Shop for a Property
The location and the property itself will make or break your investment. If the neighborhood goes downhill, you can lose a lot of money. If the property goes downhill, you can lose a lot of money.
Consequently, finding a turnkey property in the right neighborhood is the best way to secure your investment. A turnkey property is a property that’s ready to rent out upon purchase, which can yield you the fastest return.
Moreover, you will need to choose a property in good condition with a full history to display. Fortunately, there are platforms devoted to these types of properties. Learn more here!
Also, choose a location that’s unlikely to go anywhere. Easy access to public transit lines, public schools, public parks, highway on-ramps, or downtown areas tend to be safer than popular restaurants or stores. The more permanent the amenity, the better.
Your property and location aren’t the only factors that can tank your investment. Your tenants are just as important.
Always run background checks, verify income, and check their credit and rental history before accepting tenants. Asking for references is a great help as well, allowing you to control the questions and see what previous landlords have to say.
One bad tenant can do a lot of damage to your unit, leaving you to front the bill. Also, if they don’t pay rent, you could go months without rental income while still having to cover the property’s expenses. A lengthy court battle can also cost a lot if you need to evict them.
Once again, the only solution here is preventative!
Start Investing Today
Now that you have some helpful tips on becoming a real estate investor, why not put them to use? The sooner you do, the sooner you can sit back and watch the checks roll in.
Real estate is a popular investment for good reason, so get your share today, and stay up to date with our latest financial tips!