Real Estate Investment 101 – Getting Started
Right now inventories are tight, and mortgage rates are low. Many people who never gave real estate a second thought after purchasing their own homes are beginning to think about real estate investing. There are many reasons to invest in real estate. No matter your ultimate goal or objective, this investment is a big decision.
It can be challenging, but also fun and incredibly rewarding. Do your research, devise a plan, and work with a real estate agent to make sure you’re ready to start investing in real estate.
Understand Your Goals & Objectives
There are many places you can put your money–stocks, bonds, savings, under your pillow…so, why real estate? The answer to this question will guide you along your investment path. Work with a professional to assess your financial state and determine which property type you can afford. Then set attainable goals that fit in a personal timeline. What do you want to achieve in the next six months or the next five years?
One of the most common reasons people give for investing in real estate is they are seeking out financial freedom and control. There are other reasons as well. Of course, each person will have their own investment goals. They could be seeking appreciation, cash flow, leverage, or tax benefits.
Decide on Your Investment Strategy
For new investors, the business of buying, selling, and renting homes may seem pretty ambitious. Like all things, real estate investments boil down to some simple basics.
With the right strategies, patience, and willingness to learn, you can make strides in your investment opportunities. Here we’ll focus on the top four strategies: Flipping, Buy and Hold, Wholesale, and BRRR&R.
The “Lipstick” flip is house flipping with minimal cosmetic improvements and repairs. The idea is to purchase a property that needs less than $5,000 in minor maintenance. We’re talking flooring, repainting, landscaping, and new hardware kind-of-work. This strategy enables you to make the repairs, then market it and resell it quickly. Cashout and repeat.
Buy & Hold
Option number two is one of the oldest strategies in the book: Buy and rent properties for ongoing income. Purchase properties using financing, lease them to tenants and collect monthly cash flow alongside potential tax benefits. Find a property, make minor repairs, secure a tenant, and receive your rents–done.
Another way in is through wholesale or flipping contracts for fast cash. The process is to find a low-priced property, find a buyer for your contract, assign it to the buyer, and get paid.
Buy, renovate, rent, refinance, and repeat. BRRR&R is one of the more complex strategies out there, but it offers both short and long-term gains. It involves buying a property, renovating it, renting the property out to tenants, and then refinancing the mortgage later on. This strategy works best in areas where property values are rising fast.
Where to Start Looking for Deals
The internet has become the go-to resource for everything, including real estate. Sites from Craigslist and Facebook to certified realtor databases will show results. The Multiple Listing Service should be your number one. This database is a collection of properties for sale by different real estate brokers across the country. When you search favorite listing sites, you’re searching the MLS. You can search the MLS directly by using a knowledgeable real estate agent. You can even have them email you updates weekly of houses you may be interested in.
If you’re waiting for all available properties to pop up on the internet, they might not. The newspaper is still a hotspot for “For Sale By Owner” listings. There are also some landlords who will want to quietly “let go” of their properties because they don’t want to upset current tenants. If this is the case, they probably won’t tweet a “For Sale” announcement.
Be proactive and look for off-market properties. Get to know owners in your area and practice the art of straight up asking if they are thinking about selling–this method can be more effective than you’d think. An effective way to do this is to look up properties in your area where owners are late on their payments or haven’t had tenants in for a while. These frazzled owners may be hoping for a way out, and coming at them with an offer might be just the thing they need.
If that’s just too bold, there are plenty of other ways to find a deal. Search just like everyone else, but work faster. It’s a seller’s market so, if you can, paying with cash will sweeten the deal and give you leverage to negotiate. Also, the buying process goes much faster without the hassle of taking out a loan. With the help of a real estate agent, you’ll soon find yourself sweeping in and scooping up deals off the market like a pro.
If You Have a Full-Time Job
After you’ve started dabbling in real estate investing and are doing the research, you might begin to wonder: Can I invest while I have a full-time job? Yes, you can! It’s not all like you see on TV, and you don’t need a full-time career in real estate. There are hundreds of ways to make money in real estate.
Some of these techniques and strategies may require 40+ hours per week, while others are so passive they only need forty hours of your complete attention per year! The amount of time it takes to grow your real estate investments depends on your strategy, your personality, your skills, your knowledge, and your timeline.
In fact, your day job gives you several advantages over full-time investors. First of all, you don’t have to live off your cash flow from investments. By reinvesting all of your profits from your investments, you can fully realize the incredible benefit of exponential growth. You also have the advantage of getting long-term financing thanks to the stable income from work, which will further stabilize your wealth building.