As of the last available research, about 36% of United States households were renters. With interest rates high, the number is likely to go up as people have to wait longer to buy homes.
This is a good time to own an investment property that you can either flip and sell later or rent out to tenants. Are you considering becoming a property investor?
We’re here to talk all about real estate investing for beginners.
Read on for our top 7 real estate investing tips.
1. Know Your Budget
You need to give yourself a firm budget when you start to invest in real estate. You also need to know exactly what’s going to have to fit into that budget. It’s more than just buying a property.
Your initial purchase is likely going to be the largest cost, but this isn’t always the case. Depending on the condition of the property, you may also need to invest a lot of money in repairs and renovations (more on that later).
You’ll need to pay realtor costs and all of the property-related fees that aren’t just the official price. If you choose to use a property management company, you’ll be paying for that as well.
You’ll pay for maintenance, you may pay for an accountant to help you with your finances, and you’ll be paying property taxes.
Some of these costs are avoidable, but in short, expect to spend more than you initially anticipate. You may want to start with more money than you thought if you want to make your investment successful.
2. Research the Market
Any good investment starts with a good amount of research. Property investment is no exception. If you want to succeed, you need to know what you’re getting yourself into.
First, research property investment in general. You want to know all of the ins and outs, as well as the risks before you get started. This is a big investment and you shouldn’t walk into it blind.
After that, research the general rental market in the area in which you plan on buying property. Look at all of the surrounding areas and determine which one is the best option.
Many people try to invest in “hot” areas, but this isn’t always the best idea for new investors who are on a budget. Often, these properties are overpriced and the market is settling.
Up-and-coming areas are a good option for new investors, so learn about the signs that a local area is up-and-coming. This is also risky (as up-and-coming areas can always fall flat), but you should be able to make a profit as many of the properties are still undervalued.
3. Choose Your Property Carefully
Speaking of properties, make sure you choose carefully.
Are you buying a commercial property or a residential property? If you’re opting for a residential property, do you want a single-family property or a multi-family property? These are important questions you need to ask yourself.
Many new investors want to buy a dilapidated property and turn it into an investment success. After all, these are the most affordable properties, so they must be the best, right?
In most cases, no. These properties are for experienced house flippers or people with ample money and time on their hands. The cost of repairs will be more than the cost of the property.
Turnkey properties with tenants already in place can be good for first-time investors who are just dipping their toes into the property investment game.
Refer to this site if you’re looking to buy real estate that’s primed for investment.
4. Don’t Overdo It
Too many new investors get on the property investment “hype train” and overextend themselves. They go into debt buying properties that they think will end up making them money, but they have no other plans for if things go wrong.
Investing is always a risk.
You should never spend more money than you could afford to lose. You need to have a backup plan and you should take it slow. Start with one property and build from there.
5. Plan for Vacancies
Even in hot rental markets, there will be vacancies. Plan ahead and have money set aside for such situations.
Again, many people bought into the “hype” surrounding real estate. They believed that they’d have tenants lining up for their properties. When reality hit, they didn’t have any money saved up and they had to abandon their investments.
Don’t let this happen to you. You should have money squirreled away that will keep you going during vacancies.
6. Keep Putting Money Into Your Investment Property
When you buy real estate for investment purposes, you’re kind of buying a business.
All good business owners keep putting more money into their businesses to improve them. This is no different. The more money you put into your property, the more you’ll get out of it.
Spend money on maintenance. Look for upgrades that will attract new tenants and keep your property in good condition. Pay for marketing.
You should make a healthy income, but some of your money should always go toward improving your investment property.
7. Consider: Property Management or DIY?
There are two primary ways to go about maintaining your investment. You can do it on your own or you can hire a property manager. There are pros and cons to both.
If you only have one property, especially if you also live on the property (for example, if it’s a duplex and you live in one of the sections), having a property manager generally isn’t necessary.
However, if you are a busy person, if you live far away from your investment property, or if you have multiple properties, it’s often best to hire a property management company.
They can help with things like accounting, tenant screening, maintenance, marketing, and more. They essentially make your investment “passive.”
Keep These Real Estate Investing Tips in Mind
If you’re planning to purchase real estate for investment purposes, you have a long (and potentially profitable) road ahead of you. Keep these real estate investing tips in mind while you’re on your journey.
Good luck with your investment!
For more helpful articles for prospective landlords (and more) visit the rest of the site.