Very few opportunities capture investors’ imagination quite like real estate. The ability to generate passive income, build equity and enjoy steady price growth are some of the most attractive draws of investing in property.
Over the last 50 years, real estate has become a popular investment vehicle. After the subprime mortgage crisis, investors have quickly returned to the market thanks to rock-bottom interest rates and lower home values. Although interest rates are rising, they are still very low by historical standards. With the economy steadily improving, there’s plenty of upside to investing in real estate.
To learn more about the impact of mortgage rates on real estate investing, read the following article.
Although real estate offers plenty of opportunities, it can also be a lot more challenging than investing in the financial markets. In this article, we present eight quick tips for first-time real estate investors. Review this checklist to ensure you have a good handle on what to expect before you purchase your first investment property.
1. Visit a broker or financial services provider
The very first step to making your real estate dream a reality is visiting with a broker to determine how much you can afford to borrow. If you plan on purchasing multiple properties, you’ll need to budget accordingly.
Red Door Capital Group helps investors unlock passive income through custom real estate financing solutions. Click here to see what we can do for you.
2. Set your goals
There are many ways you can invest in real estate, but not all will be relevant to your goals. Are you looking to turn a quick profit or do you have lifestyle goals? Answering this question can help you determine which type of property to invest in, and how much work is necessary. There’s a big difference between purchasing a second home and investing in an apartment building. Know what you want – and how much you can afford – as soon as possible.
3. Look for cash flow properties
Buying your own home and living in it is a great real estate investment, but it only scratches the surface of the ROI you can actually achieve in real estate. Look for properties that can generate positive cash flow in the form of rent payment. Ideally, the property you buy should allow you to charge enough rent to cover your mortgage payment, taxes, utilities and other bills. Even if there isn’t much left over, your tenant is essentially paying your mortgage and building equity in your property.
Whether you’re investing in a second house or an apartment complex, cash flow is an important consideration.
4. Have the property inspected
Before making any purchase, make sure the property is inspected by a home inspector. You should also find a contractor who can help you fix any minor repairs at the right price. To secure a better price, consider developing a long-term relationship with a contractor you can trust. After all, repair work will likely be necessary once your tenants move in.
5. Get your tax situation sorted
Real estate investing carries specific tax implications. You should visit with an accountant and lawyer to determine how you will take ownership of the property. Also be sure to keep proper records and receipts, as these will be beneficial during tax season.
6. Hire a property manager
If you are handling multiple properties, it may be beneficial to hire a property manager to look after day-to-day operations. They will not only help you find suitable tenants, they will be the point of contact for any ongoing maintenance work. This is especially important if you are renting out apartments, business offices or other forms of rental units.
To learn more about commercial properties, refer to our Beginner’s Guide to commercial real estate investing. Commercial properties can be very lucrative investments at the right price. Office buildings, shopping centers and warehouses offer plenty of opportunity for yield-seeking investors.
7. Monitor the market
It may be tempting to sell your real estate quickly after purchase. Unless you’re involved in a fix-and-flip, you should avoid reaching hasty decisions about real estate. Keeping a pulse of national, regional and local market trends can help you determine an optimal time for selling (if at all). Depending on your goals, you may find that passive income in the form of rent is suitable for your financial needs. In this case, real estate investing in a long-term endeavor.
8. Walk away if the deal isn’t right for you
At the end of the day, real estate investing is a potential gateway to wealth. If a deal doesn’t work for you, don’t be afraid to simply walk away. Deal breakers can be just about anything, but usually involve exorbitant monthly payments or expensive repairs that may not translate into a higher ROI down the road. A poor location is also a reason to abandon an investment opportunity.
Buying physical property isn’t the only way you can invest in real estate. To learn more about the various investment vehicles available, check out: Red Hot Housing Market Offers Unique Opportunity for Investors.
Red Door Capital helps real estate investors locate the most competitive funding solutions in the market. By working with us, you’ll get the professional help that:
- answers all your questions;
- helps decide if your project is profitable;
- gets you a favorable loan structure;
- ensres you get past lender restraints; and
- gets you on the path to passive income months ahead of schedule.
Interested in getting started? Contact us today for a free consultation. Our goal is to connect you with a funding solution that will help you achieve your dreams.
Andrew Bettie (May 2, 2017). “Simple Ways to Invest in Real Estate.” Investopedia.
>small>Investopedia (February 13, 2017). Real Estate Investing: A Guide.
Mark Weisleder (June 3, 2014). “10 tips for first time real estate investors.” The Star.