It’s never too late to begin investing in real estate…..it’s never too early either. Real estate offers a solid investment opportunity which can provide not only an income stream but long term value appreciation as well. Investing in real estate and becoming a landlord is not true passive income, but the difference between being a business owner v. a shareholder can make the additional effort worth it.
Regardless of the ups and downs of the market, people will always need housing, so real estate will remain a good way to create wealth. By understanding some of the basic principles of real estate investing, you can begin to create your own plan.
Here are 10 tips to get you started:
1. Start Now
There really is no “right” time to start investing, but the key is to just start. Each market offers opportunities for buyers and if you are patient, you can almost always find a property for a reasonable price. Property values might fluctuate from one year to another, but a long term investment will always prove to be a good choice.
2. Use Leverage
Property purchases require cash. You need money for down payments and closing costs, plus possible repairs once you own the property. Learn about options other than your own savings for these costs. Consider these resources as well as possibly including others as partners in your investments.
3. Understand Your Expected Cash Flow
Understand your cash flow needs. In simple terms, cash flow is what is left over after all expenses are paid. For a rental property, expenses could include, mortgage, interest, maintenance, insurance, utilities, rental agents, home owners associations fees and more. You must also determine the average vacancy rates for the area and factor this into your annual budget.
4. Budget For The Unexpected
Have a fund available to draw on for the unexpected. Even the most carefully planned project can have unexpected costs. Have a back-up plan to meet these costs.
5. Invest For The Long Term
Real estate investing should not be viewed as a “get rich quick” scheme. While you might find an opportunity to have a quick flip, most real estate equity is realized over years, not months.
6. Realize Real Estate Investing Takes Effort
Investing in real estate takes work. You need to do your research and due diligence before investing. Know the market and understand the trends which can affect your purchase and ownership.
7. Understand The Risks
Although real estate can be more stable than the stock market, it still involves risk. Before investing, you should be certain that you can hold the property until conditions are right to sell. Consult with your financial advisor to determine how a real estate investment fits with your financial picture as a whole.
8. Don’t Over Extend
Remember that when you first start out, you need to be very careful about the properties you purchase. After evaluating the risk, be honest about your ability to handle the negative possibilities the opportunity could present.
9. Find A Mentor
Don’t tries this at home kids! There is no reason to reinvent the wheel. Find an experienced real estate investor and seek advice and information. The right mentor can save you thousands of dollars and keep you from making the wrong investment.
10. Be Patient
Wait for the right opportunity. Not every deal will fit with your goals. Learn to analyze each possible deal for the cash flow, possible appreciation, leverage and risk. Be prepared to walk away.
Real estate can offer solid investment opportunities. Even a first time investor can realize profit and positive cash flow with careful planning and research. Start building your real estate portfolio now. A real estate purchase could provide a low-risk addition to your other investments for both income and asset value growth.