Real estate has become an increasingly popular alternative investment strategy. It’s a great way to expand your portfolio but it does require a substantial amount of work and research.
Want to know what it takes? Here are six tips for first-time real estate investors.
- Financial Backing
Investing isn’t just about the downpayment. It’s also about repairs and renovations, regular maintenance, and various property taxes or insurances that are required.
For instance, if you’re planning to renovate the backyard of a single-family house you’ve purchased to increase the value of the home, you’ll need to have the financial backing to support an outdoor kitchen, landscaping, or even a pool addition.
Get your finances in order before making any type of investment. Create a budget for yourself as to every monetary part involved with your real estate plan.
- Research the Market
The housing market is very different from the commercial real estate market. When deciding which route you want to take with your investment, you’ll need to research what’s happening within these specific markets.
The real estate market right now is in favor of the seller. Homes in Florida, for example, are being sold for 18.4% more now as opposed to last year. Commercial real estate for multi-family homes rose about 1.3% which coincided with the rising prices for rental homes.
As you can see, residential real estate might be more profitable right now, but only if you have a grasp on the area’s demographics.
- Treat it Like a Business
If you’re planning to invest in real estate, then you need to start viewing it as a business. You’ll need to make a plan, work with other investors, and talk to the necessary lenders to get quotes for your loan.
But before you’re able to get a loan, you’ll need to have a business plan. Lenders won’t want to fund your business if they don’t see a strategic, well-thought-out plan laid out for them.
- Pick Your Location
As a part of your research, you’re going to need to narrow down specific locations as to where you want to purchase property. Just because you find a house you want to flip at a reasonable price doesn’t mean it’s a bargain. You have to consider its location.
If you plan to invest $50,000 into repairs and renovations and want to sell the house at $100,000 more than what you purchased it for, that doesn’t mean the people who typically live in the area will be able to afford it.
You have to take into consideration all the demographics such as median income, education levels, crime rate, school districts, and other amenities in the area before you even consider putting an offer down on a property.
- Learn The Laws
Every type of real estate investment has its own set of laws you need to know. When becoming a landlord for a duplex you’ve purchased, for example, you must know both landlord and tenant laws before renting out any of the available units.
Things like lease requirements, eviction rules, property regulations, or fair housing laws all begin once you have the property listed to rent. One wrong move and you could find yourself with a lawsuit or other fines.
- Network With Professionals
Becoming an investor means you’ll want to start building your network. Professionals in real estate investing will have insight into your business venture and could even become potential investors themselves.
Property management companies are another great alternative for those who are just starting out. They handle most of the logistics, such as legal lease agreements, etc. They can also do other tasks like helping you to get new guttering for your property.
Conclusion
The most important part thing is to do your research. Learn about what types of investment opportunities are available and what responsibilities are involved with each one.
If you don’t have any desire to become a landlord, you may want to look more towards REITs or house flipping. If you’d rather run a vacation home like an Airbnb, you won’t necessarily need to know the same laws that a landlord would.
Do your research as a first-time real estate investor and always talk to professionals for advice before getting yourself caught up in a financial situation.