The real estate business can be a profitable investment, if you know what you’re doing. Keep in mind that the decisions you make from the beginning will can make or break your business. To help get started in real estate investing, consider these following tips.
Understand Your Current Finances
Most finance experts tell buyers they should put down twenty percent of the purchase price; however, in order to avoid having two mortgages, are able to pay for the real estate outright? If you don’t the cash on hand to buy the property outright, consider looking into foreclosure homes that are listed below market value. If this still isn’t a feasible option look into the possibility of living in your investment as doing so entitles you to take advantage of owner-occupant rates. Most banks only require you to live there for a year in order to get a lower rate for the remainder of the mortgage. These interest rates are typically lower and more favorable than if you were to have a second rental or property loan. In order to come out on top in the long run, it’s important to determine the right financing from the start.
What is your Potential Cash Flow?
Keep in mind that house flipping isn’t always as profitable as reality television makes it seem. Renovations and repairs take a lot of time and money and don’t always make a profit in the end. Consider renting out the home as a more long-term strategy in order to make the money to cover the mortgage. Before you do anything, sit down and calculate how much cash flow you will receive by renting the property out. In doing so you’ll likely be able to see exactly how long you’ll need to rent it out in order to pay off the mortgage along with the other costs associated with owning.
What Type of Investments Will You Make?
In addition to purchasing properties yourself, partnerships (close and limited) and publicly traded investment trusts are also real estate investing options that can bring in solid returns. Partnerships are good for investors that have similar investment interests but are not ready to do it alone. Publicly traded investments are helpful if you don’t have the time or skills to run an investment of your own, and lastly, real estate investment trusts (REITs) help fund several projects at the same time without having the added hassle of management. It’s important to research each option and determine which one works best for you.
If you are serious about getting into real estate investing, then you need to be serious about understanding your options. Before you begin, know the investing options available to you, your financial situation and potential profit margins. The clearer your investment picture is up front, the stronger your chances of investing success in the long run.