You can get a serious return on investment by putting your money into real estate. While this venture isn’t for everyone, it can be a rewarding route for the right investor. Consider the various facets of investing in real estate and determine if this is the right financial move for you.
Guide to Investing in Real Estate
Form a Plan and Get Your Capital
You need to set specific goals when it comes to your real estate investment. Do you want to buy units and become a landlord or are you more interested in buying and flipping houses? With specific goals, you’ll be better able to create a detailed business plan that sets you up for success.
Finding the right financing is a crucial piece of the puzzle. Real estate doesn’t require a huge sum of personal capital; there are many financing options to choose from. You can pursue traditional means; however, banks and financial institutions have tightened the reins on loan approvals, and you may need to pursue less conventional methods.
You can go through a hard money lending company. This route offers more flexibility than traditional loans; you can access the financing you need within a week’s time—as every seasoned real estate investor can attest, time is of the essence when it comes to lucrative opportunities. This is especially true in saturated areas where real estate opportunities come and go in the blink of an eye. Consider Southern California. Getting a great property in this area is akin to finding a needle in a haystack, so if you find one, you’ll need to jump on it quickly. Accessing funding from San Diego, Los Angeles, or Orange County hard money lenders in your chosen area could give you the competitive edge.
Whichever financing option you choose, The Balance’s Joshua Kennon recommends not putting the real estate in your own name. “Instead, for risk management reasons, consider holding real estate investments through special types of legal entities such as limited liability companies or limited partnerships,” he explains. That way, you’re protected if the investment goes belly up or someone slips and breaks a bone on of your properties and decides to sue you. At the very least, you’ll recoup the money you invested.
Shopping around is a true necessity when it comes to being happy and successful in real estate. Shopping for your first real estate investment is exciting, but you can’t let your enthusiasm get the best of you. In other words, don’t buy the first place you see! Get the opinions of those who have been in real estate for years. They might shed some light on a property that you haven’t yet considered. You might even consider joining a real estate group, as you’ll learn about the industry and may get inside scoop on upcoming properties for sale.
Did We Mention Location?
As the saying goes, real estate is all about location, location, location. In fact, many will tell you that it’s best to buy a mediocre property in a good neighborhood than a great property in a bad neighborhood. The other benefit to a great location is that it usually means it receives a lot of foot traffic—if your tenants do decide to move out, the most you’ll likely need to do to rent it again is stick a sign in the window. Easy peasy!
Get Your Ducks in a Row
Okay, you’ve now got your first real estate property. Hopefully you realize that all the maintenance and other issues fall to you! If you’re a DIYer who watches HGTV 24/7, this could very well be why you got into this type of investing. However, if home improvement, gardening, landscaping, and the like aren’t your bag, you need to find the means for outsourcing these tasks. And if you’re not located close to the property you just purchased, you need to assign someone to be on call if and when the tenant(s) have issues.
Real estate investing isn’t something to take lightly, but it’s also not something you need to shy away from if you haven’t done so in the past. Take a class, consult with other, more experienced real estate professionals around you, and generally immerse yourself in the field. You’ll be an expert in no time!