How to Invest in Real Estate
Investing in real estate can turn out to be extremely lucrative, but on the other hand it also requires a significant cash investment, as well as a large store of patience, and a commitment to the process. While the biggest returns in real estate generally come from the largest investments, there are also some options available for novice investors to become involved. Here are some ways that you can invest in real estate to get those important first profits, and then move on to the larger investments.
Organize your personal finances
The first step toward preparing yourself for real estate investments is to get your own financial house organized. This means paying off any debt you might have, establishing a retirement fund, and setting up some kind of emergency fund if there should be need for it. Real estate can be an expensive prospect to get into, so you’ll need enough cash for your first down payment on property, and you’ll also need a cash reserve to implement any repairs or maintenance which become necessary.
Invest in an REIT
It’s a good idea to invest in a real estate investment trust (REIT), because this will get you involved in the market without actually having to buy any property. An equity REIT for instance, will allow you to pool your money with other investors so that you can purchase, develop, and manage various real estate properties. You’ll have the potential to receive a significant income from this investment, and you won’t be flying solo at the outset.
Understand the local market
When you’re ready to invest in your own property, you should make a point of familiarizing with the local market. In fact, it’s generally better if your first few investments are actually situated in your own neighborhood, or very close by. This will allow you to talk to local people and real estate agents who live and work in the area, so you’ll have an understanding of why people are relocating to this area. The bottom line is, it will be much easier for you to research the local market than somewhere far from home.
Perhaps more than most other industries, investing in real estate requires that you know a great number of people who can be of help to you. Building relationships with other people in the industry can be as valuable to you as any other single aspect of the business. This means you should get to know other real estate investors and agents, contractors, accountants, and even attorneys, because you never know when one of these individuals will be able to help you with your investments.
Rent out a single-family home you’ve bought
If you can find the right deal on a single-family home, you can establish steady income while you are researching other investment deals. There’s a trick to this however, and that involves making sure that your overhead costs are low, so that you can actually generate income. You have to be sure that your tenant’s rental payment covers the taxes, insurance, maintenance, and mortgage on the property, so that you can make a profit. There are all kinds of single-family homes like this available, and you can find a number of them online. As always, it will be necessary for you to do some solid research and crunch the numbers, to see if this is a worthwhile investment that will produce income. If it turns out that it can be a money-maker, this can provide you with steady income, and you may even want to move on to a second single-family home to increase your earnings.