For the past few decades, real estate prices are skyrocketing. Investing in real estate has become an exciting and money-making business and is not limited to only uber-rich persons. Having some background knowledge about the industry can help you start your career as a real estate investor.
Being a beginner, you will make mistakes, but that doesn’t mean you should stop growing. Once started, you will find opportunities to polish your expertise. With time, you will learn to increase your profits and get enough money to cover your taxes and other real estate costs.
So, have you decided to plunge into the world of real estate but don’t know where to start? This article is the beginner’s guide to your real estate investing career.
5 Steps to Real Estate Investing
Follow the given steps to start real estate investing:
1. Know Your Investment Options
Before starting your investment, you should be clear of your investing options. It’s best to have your own property or share the property with others, but there are many other options for investing. You can also invest in real exchange-traded funds or with crowdfunding companies.
- The accessible and beginner-friendly choice is to invest cash flow from renting. Buy a bigger home, rent out its parts or buy a smaller home, and take the mortgage to pay for 5 years. Then, buy another home to live in and rent out your first home.
- Another favorable option is appreciation. You can purchase a property in a developing area with the hope of selling it at some profit after some time. Or you can also go for the idea of flipping homes. It involves buying foreclosed homes at cheap rates and then spending time and money to turn them in better condition to resell. If it works, reselling them can bring you a lot of profit.
- Investing in commercial properties can bring you a lot of benefits. Keep vending machines at the commercial property to get rent for the building and money from the vending machines.
- Other good options are REITs(real estate investment trust), REIGs (Real estate investment groups), and RELP (real estate limited partnership)
2. Be More Protected Legally
Directly utilizing your property can hold you liable for various property issues. It can also lead you to lose your assets in a lawsuit. So, keep your property with a Limited Liability Company (LLC) or limited partnership to be legally protected and to bear the worst scenario. Also, discuss the legal investing options with your lawyer and understand tax-paying options.
3. Know The Real Estate Market
Good investors always put their time and energy into understanding the real estate market before investing. If you are going to invest in property, start with where you live. Know your local market, keep an eye on home listings, discuss with realtors and visit local development corporations to know more about affordable developing properties.
4. Keep Track Of Your Expenses
Keep track of your investing expenses such as property taxes, investment taxes, income taxes, and insurance and maintenance expenses. Keep a clear idea of what you have invested in a property, what you have to pay for mortgages and taxes, and how much you have to expend on utilities if the property goes unrented or unsold. If you stay alert, make wise choices and spend carefully, you can make a fair amount to invest in better properties and avoid extra expenditures.
5. Make A Plan
Without proper planning, you cannot win the real estate game. You have to make mid-term and long-term plans of possible investments that you want to make and what you want to own at the end?
Think about whether you will turn the real estate business into a full-time job with successful investments? If you are going to keep your day job, what about hiring a property manager to manage your daily operations?
With time you will get to know more about real estate for making a better plan. Your plan isn’t constant; you can change it with the upcoming lucrative opportunities. But the key is to always work after making a guiding plan.
These steps are the general framework of starting as a real estate investor. These steps can help you overcome the analysis paralysis and understand things faster. Don’t worry about ingesting every piece of information before even starting. With time, you will learn the trick of passing all the overwhelming situations.