So, you've decided to invest in real estate. Good move! Real estate is great way to build some passive income, or money that rolls into your bank account without you having to do much.
Real estate is also a fairly safe investment. However, like most business ventures, you need to educate yourself before you get started. In order to help our readers get the most of their new investments, we've put together these 8 tips to help you get started on the right foot.
Our Top Tips for New Real Estate Investors
- Take Care of Your Own Housing First: Before you start investing in real estate, make sure you've got your own housing under control. This will give you better tax write-offs and should dramatically raise your credit score. Then you can move to your next house with a low-interest rate and low down-payment, and keep the first as a rental.
- Watch the Market Cycles: All markets are cyclical. Even if your home isn't worth much now, it will increase once again. As long as you're patient. Which brings us to our next point...
- Be Patient: Flipping and selling homes quickly may sound like fun, but it's not a realistic strategy, at least not right now. Millennials are renting for longer periods of time, so right now it's better to invest in properties you plan to rent. But be patient! Don't ever rush into an opportunity. Instead, put your energy into planning and paying attention to detail.
- Beware of Hidden Expenses: Especially when you purchase an older, single-family home, those rehab costs can really add up. Beyond the cost of the equipment and labor for repairs, they can also cost you time, and rent. This can reduce your ROI.
- Numbers Over Emotions: When you make an investment, keep your emotions out of the equation. Never let fear or greed fuel you. Analyze the choice thoroughly, taking into account vacancy costs, maintenance prices, and tenant risk profile.
- Only Work With People You Trust: Make sure you network early on, and build relationships with people you trust. Having a banker, co-investor, developer, broker, and contractor you trust will make all the difference.
- Get to Know Your Market: This will help you learn to spot a deal. When you get started, it may take an hour or more to analyze whether a property is a good deal, but once you get the hang of it, you'll know the neighborhoods well, and they'll be easy to spot.
- Don't Set Limits: You may feel that all your investments need to be close to home, and at first, that may be true! However, if you only invest in properties in the city you live in, you'll be missing out on a whole nother world of opportunity. Check out our past post to learn more about the benefits of investing out-of-state.