If you’re reading this, chances are you’re interested in real estate investing. That’s great! Real estate is a fantastic way to build wealth and achieve financial independence. But before you can invest in real estate, there are a few things you need to know. In this blog post, we will discuss the different types of real estate investments, how to get started, and what to watch out for.
So, what are the different types of real estate investments? The most common type of investment is rental property. Today let’s focus in this realm, even within this segment of the investment market there are multiple avenues you can explore. You can go for single units, which include townhomes, condos, detached houses and multifamily (in this blog we are sticking to under 4 units because that will keep it still residential and not commercial for loan sake). With rental property the idea is you purchase a home or other piece of property and then rent it out to tenants. This can be a great way to generate income, but it also comes with some risks and responsibilities. Another type of real estate investment is house flipping. This is where you purchase a property, make renovations, and then sell it for a profit. Flipping can be a great way to earn quick cash, but it’s not without its risks.
Now that you know a few different types of real estate investments, let’s talk about how to get started. The first step is to educate yourself. Understand your local market where you want to invest. Have an exit strategy, is your goal cash flow or is your goal long term appreciation?
Here are a few of the things I would drill down on for each investment:
What is the average days on market for this type of property?
What is the average sales price for the type of property I am looking at?
What is the vacancy rate for rentals in this location?
What are the current rents and how long do properties typically take to get rented?
All of these factors will help you understand what to expect when investing in a certain area. The next step is to create a budget and plan for your investment. This includes figuring out how much you can afford to spend, where you will get the financing, and what kind of return on investment you can expect.
Once you have a budget and plan in place, it’s time to start looking for properties. Find yourself an agent that has lots of experience and can help you navigate the inventory landscape and even identify properties that are not on the open market. Great agents know how to network and have access to properties that are hidden in plain sight.
Once you find a property that you’re interested in, it’s important to do your due diligence. This includes things like ordering a home inspection, getting a title search, and reviewing the property’s history. Make sure you understand what types of repairs or renovations will be needed and how much they will cost. It’s also important to have a solid understanding of the financials of the property. This includes things like running a rent roll, evaluating expenses, and understanding the tax implications of your investment. After you have done your due diligence and are comfortable with the risks , it’s time to make an offer!
Finally, here is where I find most peoples achilles heel, things you need to know:
What are the steps you need to take to be a landlord?
Is there a business license or inspection process in your city?
Fully understanding the landlord tenant laws, being one step ahead here can safe you countless hours and lots of money. (Being an investor is not always sexy!)
Real estate investing is a great way to build wealth, but it’s not without its risks. By following the steps above, you can minimize those risks and give yourself the best chance for success.
Do you have any questions about real estate investing? Leave a comment below and we ‘ll be happy to answer them!