A Guide For Beginner Real Estate Investors: How To Minimize Risks And Maximize Profits…
Real estate has long been considered a sound investment, and for good reason. Before 2007, historical housing data made it seem like prices could continue to climb indefinitely. With few exceptions, the average sale price of homes in the U.S. increased each year between 1963 and 2007—the start of the Great Recession. Home prices did take a small hit at the onset of the COVID-19 pandemic in the spring of 2020. However, as vaccines were rolled out and pandemic concerns waned, home prices accelerated to reach all-time highs by 2022. Real estate investing can yield impressive returns, when you know the rules. In this blog we would like to list a few of the rules for the people just getting started in real estate investment.
Choose A Specific Real Estate Investing Strategy
Focus on one real estate strategy at a time. Starting with one specific strategy doesn’t mean you won’t have detours or even a complete change of direction later. Life happens, and you have to be flexible. But starting with just one will help you focus. And this will give you the confidence to get started. Do you want to start with just one property? Will you start with an Airbnb or VRBO? Maybe you want to work with REIT’s — a real estate investment trust company that owns, and in most cases operates, income-producing real estate. Or maybe you want to start flipping homes? Do your research and choose a strategy that best suits you and then stick to it.
Education Is The Key Component To Real Estate Investment
Know your strategy choice. Become an expert in your field. Read books, research your local market, partner with a property management company, and take advantage of anyone’s expertise to expand your knowledge. You may even consider getting a real estate license. You do not need a real estate license to invent in real estate, but it gives you access to the MLS (multiple listing service), commissions when you buy properties, and saves you commission when you sell your property yourself.
Watch The Real Estate Market And Buy As Low As You Can
Buy the least expensive house in the nicest neighborhood you can find. The buy low/sell high strategy has proven over time to show the most profitable outcomes. And remember…location, location, location! Choose a good location and you’ll likely get significant increases in property value. Choose a bad location and you’re screwed. But never buy the most expensive house in the neighborhood.
Create A Real Estate Investment Timeline
How long do you want to tie up your time and money in this investment? Understand the average timelines for your chosen strategy. Having a clear timeline will ensure that you stay on track with your investment goals. An example: First-time or beginning house flippers will often greatly underestimate the amount of time it takes to flip a house. This is often because they underestimate the amount of work involved in rehabbing a property. So how long does it take to flip a house? It typically takes between 4 and 6 months to complete a house flip from purchase to the sale of the property.
How Much Time Do You Want To Spend Personally On Your Real Estate Investment?
Managing your own property can be time-consuming, especially if you’ve built up a nice portfolio of rental units. When I hear of people spending an inordinate amount of effort with their own rental properties, it’s almost always because they’ve chosen to self-manage. Or do you want to spend your efforts on finding a good property management company? Is your time worth more than whatever you’d pay them? If you are going to do a lot of the work on flipping homes, do you have the time to do this? Ultimately, it is true that real estate investing can be time-intensive – just how much depends on how you structure things.
Give Proper Attention To Local Statutes And Regulations
- Local city regulations
- HOA by-laws
- Fire and safety codes
- Historical building restrictions
- Fair housing
- Noise ordinances
There Is Room For Everyone Who Wants To Make A Profit Through Real Estate Investing
Real estate can be a great way to make money as an investor. Not only do real estate investments have the potential to produce excellent long-term results but also tax advantages, and they can add diversification to your overall investment strategy. People think you have to be rich to invest in real estate. So how much money do you need to invest in real estate? Depending on the project, you may need as little as $500 to invest in a “fix-and-flip” single-family property, or you could easily invest $100,000 into a major office-to-residential rebuild project. You can actually start investing with little to no cash upfront!
Ways to begin investing in real estate with little or no money:
- Buy a home as a primary residence.
- Buy a duplex and live in one unit while you rent out the other.
- Create a Home Equity Line of Credit (HELOC) on your primary residence or another investment property.
- Ask the seller to pay your closing costs.
According to a Gallup Poll, real estate was rated the best long-term investment – well ahead of gold, stocks and mutual funds, savings accounts/CDs, and bonds
Don’t beat yourself up. Some transactions will naturally go smoothly, and others are a month of challenges. Learn what you can from each transaction, move on, and start the next one. Real estate is the purest form of entrepreneurship.
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About Real Property Management Midwest
We are local property management experts serving Cincinnati, Dayton, Columbus, & Louisville. We manage Single-Family Homes, Apartment Buildings, and Condos. With years of experience, Real Property Management is Cincinnati, Dayton, Columbus, Louisville and Northern Kentucky’s #1 Property Management and Leasing Company.