What Every Real Estate Investor Should Know: The Top 5 Things to Consider When Starting Out as a Real Estate Investor
So, you've decided to become a real estate investor? Welcome to the realm of possibility! Real estate investing may be lucrative, but it can be difficult for novices. Any tutorial on the subject of real estate investing for newcomers would be incomplete if it failed to address the following fundamental issues to consider before committing any funds.
1. Location, Location, Location
Location, location, location has long been the realtor's motto. If you're looking for a new house and like the idea of living in a remote region on the outskirts of town, go ahead and buy that dream property in the middle of nowhere. But, if you're buying a condominium to renovate and rent to students and professors at your local university, you'd better make sure it's near the campus facilities. It's all about where you are.
The most successful investors aim for properties in areas with a large number of available qualified tenants. The greatest profits are generally generated by housing complexes located in developing and growing areas, even if they aren't necessarily the nicest neighborhoods. Do your research and learn everything you can about master plans for development, future transportation ideas, and so on before making a selection.
2. Do Your Homework Before You Make a Purchase
Whether you're participating in a crowdfunding campaign or purchasing your own house to rent out, you'll need to do your homework (or, even better, hire a professional who has already done it for you). There are no shortcuts here - research is required and will be collected. Savvy investors must be aware of the many regulations and restrictions that govern zoning, building. They also study local demographics, company and retail trends, schools, transportation accessibility and leisure and dining possibilities. Taking a stroll around the community and speaking to local people and business owners is also part of your research.
3. Make a budget and stick to it
Take a close look at your finances before making any investments so you can figure out how much money you have to invest. Because we all have unique risk tolerance levels, this choice will be highly subjective. A mortgage broker or real estate investment trustee might examine your situation and determine you are able to afford to invest a specific amount of money. But if their number is not one you feel good about, don't do it! If you are investing in a property on your own, make sure there is enough money set aside for unexpected expenditures.
4. Decide How Much Work You Want to Do
Everything from upkeep and repairs to taxes and insurance payments is part of home ownership. If you're a hands-on DIY type who enjoys doing yardwork on weekends, a single-family house or a small multi-family investment may be ideal for you – especially if you can forego the services of a property management company. If you have a full-time job, enjoy spending time with your friends and family on weekends, and have no idea how to repair a leaking roof, shared ownership is probably the way to go.
5. Reduce Your Risks
Whether you're buying a fixer-upper and turning it into a profitable investment, renting out a property in an up-and-coming area with tremendous potential for development, or investing in a REIT, you must be aware that no investment is without risk. The key to successful investing over time is to manage and minimize that risk. The simplest method to do this is to put in the time, effort, and study necessary to locate houses that will appreciate and produce income or you may also choose to benefit from the benefits of collaborative knowledge and expertise through real estate partnerships or crowdfunding platforms.
There are no short cuts to prosperity, and most of us are unable to become rich solely through our salaries. Over the years, real estate investing has remained a success story. Take the trip!