If you want to invest in real estate, you probably want to make money as quickly as possible, with as little risk as possible. You can only achieve this if you know how to make smart choices. The following three things make for an excellent real estate investment to help you get started.
Do not invest in real estate before you actually have everything you need. To get started, you will firstly need to have investment capital. Also, study the real estate market and get to know the neighborhood you are interested in.
On a personal level, you need to learn to manage and negotiate and you need to have people skills. You also need to be able to do repairs, or have a team of people to do this for you. Last but not least, make sure you hire a property inspector. Most people who invest in real estate do so because they want to become landlords. This means that you must learn about being a landlord and how to find tenants that are desirable. It cannot be stressed enough how important it is to have money to spend in order to make more money. Generally, only those that have at least some starter’s capital are able to make it in this world. Now that the practicalities are behind you, you can start looking into locations. Spend time at town board meetings, go online and use local libraries. You must learn about what the location is like and how it is likely to develop.
Generally speaking, it is easier to get started with rental properties if you are younger, particularly if you don’t have a lot of money to put down. This is because banks usually want at least 20% as a down payment before agreeing on a mortgage. Unfortunately, 20% can be much too high, particularly if the property needs repairs as well. However, banks tend to be a bit nicer to younger people. Real estate investing does involve a lot of other things as well. Of course, one place to start is actually finding a property. However, even this requires a whole lot of research and analyzing. One of the things you will also have to do is find a realtor that represents you properly. Together, you can start looking for properties. Once you have found a property, you will need to go through the process of actually becoming a landlord, which also takes a lot of training and research. Don’t let this put you off, however.
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All real estate investors are looking for options that have high returns and as low a risk as possible. This is only possible if you know how to make smart choices. The following three things make for an excellent real estate investment to help you get started.
You should look at rental properties like stock markets. This is because most of us understand these and know that we need to spend money to make money. However, with stocks, all we can do is hope that they increase in value. This is also the case with retirement calculators, who literally have to guess when we die. The problem is that if there is a mistake in this estimation and you actually live longer, your final years will be spent in poverty.
Also, make sure that your investment isn’t too risky. There is no such thing as risk-free real estate, but some risks are too high to take. If at all possible, avoid tenant-in-common options, fixer uppers, real estate development and private real estate funds. Indeed, with these options, so much can go wrong that you are likely to never see a return on your investment. Instead, choose to have titles that are totally yours, on properties that are interesting. Of course, this takes a lot of research, analysis and due diligence. Next, you need to find a property that doesn’t require a lot of management or time. Stay away from student rentals, vacation properties and bad neighborhood homes, for instance. What you want is a long term rental opportunity with tenants with a good credit profile. You will only be able to achieve this, however, if you also commit to being a really good and respectful landlord. All properties will have some sort of issue at some point, but this should be manageable so long as you deal with them quickly.
You may want to consider investing through a REIT (real estate investment rrust). Through a REIT, you can get started in investing with less capital behind you, although your returns will be smaller too. Working with REITs basically means you invest in other corporations. This includes things such as shopping malls and industrial complexes. A REIT is also listed on the stock exchange and NASDAQ. A REIT can be best compared to a mutual fund, although the REIT invests solely in real estate. Before investing in a REIT, there are a few things to learn about. Consider the key holdings’ economic conditions for starters. Also, you should look into how the REIT has performed historically. Additionally, their future plans are very important. Also find out who the REIT is managed by and what their experience is. Lastly, you need to look into the current state of the real estate market and how the REIT is expected to respond to that.
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It cannot be denied that mortgage interest rates are very low at present. Plus, although they are rising, home prices are still affordable. However, this does not mean that any home you come across would make a good investment. The market is, at present, in favor of the buyer. However, you do have to exert due diligence before you buy. There are plenty of red flags out there telling you to move away from a purchase. Some of these are fixable, others tell you to look elsewhere. Two things are of true vital importance, however.
First of all, you must be wary of the “fixer upper.” These properties are often very cheap, which makes them very attractive. Often, we believe that the things that need fixing are things we can do with our own DIY skills. In reality, however, they are often things that must be done by qualified professionals. Qualified professionals are incredibly expensive and you may not have sufficient budget for that. Secondly, be very careful of properties that have clearly had DIY adjustments. A DIY job can look as if it was completed properly, but you can’t see inside the structures where it is likely that a lot of problems exist.
The second key factor to look into is for you to figure out whether you are looking at a foreclosure or short sale property. Indeed, these properties tend to be the cheapest, but that is because they often require a lot of work or because the entire neighborhood is declining.
At the end of the day, only you can decide whether or not you should purchase a property. It is also true that if you are looking for a true bargain, then a house with problems is what you are looking for. You do have to ask yourself whether that bargain is worth the potential financial hassle you are putting yourself through. Homes, whether purchased as an investment or not, are places for people to live in, which means they have to be inhabitable. Although it is certainly true that you should look into the condition of the actual property, focusing on the neighborhood is equally important. In terms of the condition of the property, you can simply ask a property inspector to come and check it out, after all. When it comes to the neighborhood, however, you need to have a personal feel, something that cannot be achieved by a check box list.
It is certainly true that mortgage interest rates continue to be at an all time low. Additionally, home prices are still low as well. However, it is important to understand that these two factors do not automatically make any property a good purchase. The market currently favors the buyer. However, never buy a property without having researched it. There are plenty of red flags out there telling you to move away from a purchase. Sometimes, this means that you need to fix a problem, but at other times it means that you shouldn’t buy. There are two factors in particular to be aware of.
Firstly, always look at the neighborhood. Is the number of homes and businesses dwindling? Speak to others in the street and ask them about the community. Next, look at the land. If the land slopes downwards towards the property, there is a chance that the foundations have been or will be damaged by flowing rain water. Use your nose: bad smells in or out the property are a bad sign. Next, check whether there are pests. Ask community members of this, as everybody always knows when someone else has pests.
A number of things may also have happened to a property that are very hard to restore. Make sure you check for signs of the presence of water damage, pest damage, asbestos, mold and faulty wiring. The issue is that identifying these types of problems can be very difficult. The current owners may not even know that the problem is there. If they do know any of these problems are present, they may do all they can to keep them hidden. It is incredibly easy to hide these significant issues through simple things such as cleaning and switching the power off. To find out whether these issues are there, you can organize a professional home inspection, but you can also speak to community members. They can tell you about the history of various properties in the area. Usually, problems like pests, water damage and mold don’t occur in just one home.
The bottom line is very simply that a home should never be bought unless a professional inspector has given you the green light. The information above, therefore, is not designed to help you decide whether or not you want to buy, but rather whether or not you want to have it inspected. If you find that there are indeed serious problems with the property but you don’t want to simply walk away, you could consider asking for a large discount so that you can pay for repairs. Do also consider the opinion of your home inspector. The goal of professional home inspectors is to make sure that you can truly get your dream home, and not some sort of money pit disaster.