In the United States real estate is one of the key components of people’s wealth, as 65.1 percent of Americans own a home.
Are you ready to dive into the world of real estate investment? Real estate investing can be very profitable, there’s no doubt about that.
However, for a beginner, you might find yourself falling into the pitfalls that can arise when you start investing in real estate. Here are some tips that will guide you in the right direction.
Types of Real Estate Investments
There are many types of real estate investments available. However, there are three main types that you should pay attention to if you are a beginner.
The three main types of real estate investments that are great for beginners are, wholesaling, buy and hold, and fix and flip.
Wholesaling
Wholesaling usually requires very little capital on your part. When you invest in wholesale real estate, you will serve as a middleman that connects sellers with buyers.
You will identify a property that is a great investment. This property is usually being sold under market value.
You will then arrange for a contract to be given to a buyer. A profit is made by charging the buyer a service fee.
Buy and Hold
Buy and hold is another technique that is popular in real estate. This is when you buy a property and keep it for some time. You can rent out the property during the time you are holding it.
You will then wait for the market to become favorable for a sale. Once it is, you will sell the property for a significant profit.
Fix and Flip
Fixing and flipping a home is yet another way in which you can get into property investments. Fixing and flipping a property involves buying a property that is well below market value.
The property is usually in need of some repairs. You will then fix up the property and sell it for a much higher price than you purchased it for.
The strategy can be quite tricky and it requires you to be very selective about the property you choose. The worst-case scenario is you will have to sell the property for a lot less than you bought it for.
Strategies for Real Estate Investing
Before you decide to do any form of real estate investment you need to be very specific about the goals you want to achieve. This means that you should create a timeline for seeing a return on your investment.
When setting your timelines for seeing a return on your investment you need to make sure that you are realistic. Many real estate investments take months or even years before they pay off.
When you are just starting it is best to find someone to help you. Get someone who is seasoned in real estate investments and ask them to act as your mentor.
This person can take a look at any contracts that you wish to enter into and give you advice before you invest your money. Mentoring is something that will be easier to accomplish if you start networking in the real estate market before you even decide to invest.
Talk to real estate agents and financial advisors before you do any investment. These people usually have connections in the real estate market and they can assist you with finding someone to mentor you as you start investing in real estate.
Having a real estate agent on your team gives you the additional benefit of being able to access specialized property listings.
Borrow Wisely
Property investments can cost a lot of money. There are times when you may not have enough capital to buy a property on your own.
When this happens you will have to liaison with different lenders to see if you can come up with extra capital.
Finding the right lender can be a tedious process. Be sure to review many lenders and weigh the pros and cons of each before deciding on anyone in particular.
For your first real estate investment, it is best to find a partner to back you. This partner should have a lot of experience closing real estate deals so that any risks are severely reduced.
Common Mistakes to Avoid
When making real estate purchases it is important to do diligence before investing or buying any property. A mistake that many new real estate investors make is to buy a property simply because it seems to be very cheap.
However, before you buy any property you should have it thoroughly inspected by a home inspector. You never know if there are underlying reasons why the property is being sold at such a low price.
Getting the property inspected will determine how much it will cost you to repair the property. Crunching the numbers before making a purchase is an easy way to ensure that you do not make a bad decision.
Another mistake you should avoid is assuming that because a property is in a residential location it is a good investment. When buying a residential property the first thing you should do is research the neighborhood.
Find out where schools are located, if there is a high employment rate, and how much money properties are being rented for in the area.
Start Your Journey
There is a lot to consider when you decide to dive into the world of real estate investing. The first thing you need to do is decide on what type of investing is best for you.
You will then need to set goals, network with professionals, and take the time to research and prepare before you invest in a property.
If you would like help with managing your real estate properties, please contact us.