If you’ve been looking for a long-term wealth building strategy that still provides short-term gains, then real estate investing is likely a strategy that you’ve come across. Property investing allows for the short-term benefit of passive rental income while generating you the long-term asset of owning the investment property free and clear. Before you decide to start investing your money in just any investment property, there are some initial basics that you’ll want to know to get started on the right wealth-building path.
Get Familiar With Online Real Estate Platforms
Unfortunately, a lot of the knowledge that you’ll need to be successful in the real estate investing arena comes through hands-on experience. Every deal is different and time tends to help you gain the information you need to be more confident in making buying decisions. However, one way to help indulge yourself in the real estate investing platform is to get overly familiar with real estate platforms that are online.
These are going to be your best friend when it comes to finding properties to invest in. Realtor, Zillow, and Trulia are three of the most popular online real estate platforms to look at. These can give you an idea of the types of homes in specific areas that you’re considering investing in. You can see the structure type, listing price, bedroom count, bathroom count, heating source, and so much more. These are a great resource to start understanding the value of homes in your investment area.
Decide On Your Long-Term Strategy
Everybody has their own strengths when it comes to real estate investing. Some individuals are great at doing contracting work for rehabbing a property. Others are great at finding investors who are willing to provide financial support for joint ventures. Even others are great at both. Take stock of what your true assets are when it comes to the real estate market.
There are three main long term strategies that people use. The first is to simply buy rental properties with down payment money or cash. With this strategy, you and any partners that you have will collect passive income via the rental check payment from the tenant or tenants of the property. This allows for a repeatable process as long as you continue to have a source of funds for affording the down payment on each property.
The second strategy is to flip rental properties. This is the area that is given the most media coverage on the market today. With this particular long-term strategy, you purchase a property that is in a distressed state. Through the rehab process, you increase the value of the property. Then, you sell off the property at the newly increased price. This type of strategy allows you to profit the increased value of the property minus the rehab and realtor fees.
The third strategy is a mix of both of the above strategies. It’s called the buy, rehab, refinance, and rent strategy, or BRRR for short. In this strategy, you purchase a distressed property. Through the rehabbing process, you increase the value of the property. Then, you cashout refinance the property to pull out the equity you built up in the home at the newly appraised value. Lastly, you rent out the home to receive short-term passive income and a long-term free and clear property. When done right, this method allows you to pull out the down payment money you invested in the property as well as some profit.
Find An Investment Friendly Real Estate Agent
When you’re looking for an investment property, you’re likely going to want to use a realtor. They have knowledge about real estate transactions that can help you along the way. Don’t make the mistake of trying to purchase properties without a licensed realtor as it will cause more of a headache then it’s worth. Yes, your realtor is going to cost money. However, in most states, the seller will pay your realtor’s commission.
Realtors tend to get a little sketchy when you first speak to them about real estate investing. In most cases, they have two major issues that they’ve run into in the past. The first is that they show numerous properties to an investor who ends up having contracts that fall through. This means the realtor didn’t get paid for their work. The second issue is that the realtor is likely showing distressed properties where the purchase price is fairly low. The lower the purchase price of the property, the lower the realtor’s commission check.
By being upfront with a real estate investor, you can foster good relationships from the start. Let them know that you’re investing in real estate. Value the realtor’s time and only ask to see properties that you’re actually interested in purchasing. When the realtor knows that you’re serious, they’re more likely to work with you. In addition, they know that they’ll likely foster a long-term relationship where they can sell you multiple properties.
Property Management Can Make All The Difference
One of the biggest debates about rental properties is whether or not to use property management for your rental properties. It can be more appealing at first to handle the tenants yourself as it doesn’t cost you out of pocket. Property management fees tend to run anywhere from 8 to 10 percent of the monthly rent depending on the town. This can eat into your monthly profits and must be accounted for ahead of time.
While it can be tempting to try and handle tenants on your own, it’s highly likely that you’ll end up wanting to use a property manager later on. This holds especially true when you have multiple properties that you’re dealing with. Getting calls from tenants about maintenance, the rent, figuring up contracts, screening tenants, and so forth can be a real pain. When you hire a property manager, you’ll find that they’re worth every penny of you not having to invest your own time and stress in the process.