Real estate has long been held up as one the most solid investments one can make. It can stand the test of time and reap rewards even in the most volatile economic scenarios. If real estate investment is a consideration for you, start by checking out this Starter Guide. You’ll be glad you started here first!
The Real Estate Investment Starter Guide
A real estate can give you a great source of income (at great rates) as well as long-term return potential at the time of sale. Another factor to add in is the potential borrowing power your real estate investment could allow you to take advantage of. For all these reasons, real estate is widely considered a sound place for investment. With a few solid tips noted before you jump in, your real estate investment will go smoothly and, most likely, profitably!
Single Family Homes – Buying a single family home in a real estate market that holds good potential for rising values is a great place to consider making your first real estate investment.
A few prerequisites should be noted such as:
- The bank may require you to put more cash down on an investment. The perception is that if you find yourself in financial trouble, you will walk away from your investment property first. You may be asked to come up with as much as 20% down payment on your investment property.
- You need to have very strong credit. Obviously, lenders will want to make sure that you have a stable credit history before supporting your request to borrow for real estate investments.
“Flipping” Homes – A trending topic in real estate investment is house flipping, which simply put means: you buy a home that needs a lot of work, do the work and then sell it. The idea is that this will all be done quickly and the “flip” will generate profit at the time of sale. House flipping has worked out well for many, but comes with some caveats:
- It is important to have a good, reliable source for the repairs the house will need. Contractors can be very expensive and estimates can increase drastically after the project begins.
- Expenses can add up (and eat away at your net gains) such as interest if the purchase is financed, taxes, utilities, and repairs that run above estimates.
- There is no guarantee that the market will remain stable (or on a growth pattern), so this kind of investment does not always yield gains.
Rentals – Condos or single family homes can be bought with the intent to rent them out. The rental income can offset the cost of the mortgage, maintenance, upkeep and routine repairs. The rental income can essentially help you hold on to the property while it (hopefully) increases in value and ultimately yields a positive return on investment at the time of sale. Also, worth noting is: many expenses associated with being a landlord can be deducted from the passive income received from the rental property to avoid extra tax burden.
- A Note About Being A Landlord – In the age of the Airbnb take over and rental markets in many locations skyrocketing, jumping into real estate investment with a rental property may seem extremely lucrative. However, you should be realistic about what you are signing up for. Being a landlord can include not-so-glamorous efforts like chasing down rent checks and getting a phone call at 3 AM regarding a blocked drain. Of course, your landlord experience may not be negative and you might use third party options to handle the legwork for you; but it’s good to know that there are time requirements and responsibilities that come with being a landlord.
Understand Your Market – Be sure to do some research and gain a full understanding of the market you plan to invest in. Websites such as the Bureau of Labor Statistics, the Federal Housing Finance Agency and the US Census Bureau can provide a wealth of information to potential investors.
Real estate, some say, is the best investment and definitely one to consider. It is important to do your homework on the real estate market, carefully assess your financial situation and have a thorough understanding of the tax and regulatory requirements of the city and state in which you live before getting started. Once you’ve done your due diligence, you may just find real estate investment is for you.
If you are ready to buy, sell or rent a property, be sure to check out the innovative new company, Beycome. We’re changing the face of the real estate marketplace by allowing sellers, buyers, and renters to connect directly and eliminate costly commissions. Join the real estate revolution!