Real estate investing 101: Three key factors to consider first.
For as simple as real estate investing is to define - actually entering the market space can quickly become overwhelming. So for the novice investor where do you begin? Like any successful business you must begin outlining a business plan. Here are some factors that will help you dig your heels into the market and start gaining traction.
What is your current living situation & how will you buy?
This may seem like an obvious and simple question but not enough people take them time to research their position and the corresponding options. For example if you currently own your home - are you going to make your primary your investment property or are you going to leverage current equity to finance a second? Do you have the equity and/or cash to qualify for a second mortgage? Do you want to involve your personal assets or would you like to pursue alternative forms of lending? There are a variety of lending sources that can allow for creative solutions click the image for more info.
How much time are you willing to commit & how quickly do you want your ROI?
Balancing work and personal life can sometimes be chaotic and time always moves faster than we anticipate; keeping that in mind realistically think about how much time and energy you are truly willing to commit. For some people getting into real estate investing might be your sole focus, for others it might be a secondary. Also you must consider how quickly you want a return on your investment. Is this passive income via rentals, airbnbs, etc. or is this more of fix and flip? Depending on what type of time frame you are on will also dictate what lending sources are/are not available to you. Contractors are always another variable which will impact your time spent on a property. Human error is a constant so it is always best to set yourself up for success and overestimate any and all time frames. Property improvement needs, type of financing, and your own time goals will all help you define what size property(s) is best for you to begin with.
Network with industry partners and don't be afraid to lean on them.
No matter what you are going to have to deal with a variety of parties in every real estate transaction and every transaction will be different. Most people know that title companies handle the service of processing and transferring over the deed itself and legally recording you as new owner. What a lot of novice investors overlook is the options of title holding/transferring which in most scenarios can save them a lot of money - this is one thing wholesalers always take advantage of. Aside from title, lenders are also great resources to help you get creative on your options to really maximize your equities and investments - they can also help you keep long term goals in mind as your DTI constantly will be changing. Last but not least real estate agents themselves are huge assets to every investor and probably one of the most under utilized tools. Most states do not require the buyer to pay the realtor, as commission fees come out of the listing agreement paid for by the seller (regardless of who the buyer is) so that means you are not only getting free representation - you also have an industry expert on your side. Not all Realtors are created equal so it may take interviewing a few to find one that is truly focused and educated on the investor niche but once you do it will be well worth it. Realtors have access to city planners, zoning, permitting and tax records, market reports, pre-foreclosures, wholesale deals, off market deals, MLS database and so much more. A great Realtor can advise you on many market facts to help you pinpoint the ideal investment property for you while helping you diversify your portfolio over time to ensure no matter what the overall economy does - your pocketbook will keep growing.
To have a personal consultation and dive into these factors more contact me today. To learn more about these factors stay tuned for next week's blog.