Article written by James Perrone
With the current state of the US economy, many investors and potential investors are looking to add real estate into their portfolios. Every time you turn on the TV, there is a new show on HGTV or CNBC about real estate investments/flipping. As you watch the show, they make it seem like the entire process of investing in real estate is simple and easy. Unfortunately, what you see on TV is not always the reality of what goes on in the investment world. The truth is that one poor decision can cause you to become engulfed in debt from the very property that you thought was going to make you rich. However, with the right business strategy and a lot of capital, the investment world of real estate can become a wonderful way for you to earn money. Here are some investing tips that can help you navigate the world of real estate and become a disciplined real estate investor.
STEP 1: Know your Budget:
Firstly, you have to review your financial situation before even considering investing in a property. You MUST determine how much capital you can safely put into a property. How do you know if you can invest in a property safely? It’s simple. Budget a quantity of money to put towards the house. Then determine that if you lost every dollar you put into a home, you will still be afloat and financially secure. Remember that financial stress kills your wallet, your investment portfolio, as well as your mental and physical health. To sum up: Make sure you have enough capital to keep you afloat no matter what the circumstances.
STEP 2: Find the Property:
After your capital sources are secured, you must determine what type of property will fit your interests and spending ability the best. Not every house will provide you with that highly anticipated ROI or, return on investment. The ROI is the reason you invest in the first place. When looking through websites such as mls.com, Zillow.com, or trulia.com for properties, make a list of properties to visit and go to their open houses. While there, talk to the real estate agent about the properties history, and ask them to run “comps” of other homes that were recently sold in the area. “Comps” are a fantastic way to estimate how much ROI you can earn on an investment because they are based on similar homes that sold in the area. If homes are only selling for a little more than purchase price after home improvements are performed, that property is NOT a smart investment. Research of the home and its neighborhood can prevent future headaches because you will know what to expect with the chosen home.
STEP 3: Shop Around:
Another thing to keep in mind when seeking an investment loan is to shop around for the best deal. Go to various lending institutions and determine which one provides the best rate for your investment. Be sure to be prepared before you go looking for a loan to be financed. For the most part, lenders require a FICO score of 700 or more for investors. The wisest path to take is to pay down your outstanding debt before searching for an investment property loan.
STEP 4: Network with People in Real Estate
Before investing in a property, speak to people in the industry and develop a “dream team” of advisors/mentors. They can provide you with advice and the resources you will need down the road. Contact experienced investors and read books that experienced investors have written is instrumental in achieving success. Turn to disciplined investors with large and successful portfolios and you can avoid costly mistakes as well as become prepared for potential obstacles by learning from the best. In addition, you should develop relationships with realtors to help you find good properties. Befriending a realtor or two can help you find the best real estate deals in the most desirable or up and coming neighborhoods. Developing a relationship with a contractor, mortgage broker, or even a financial adviser gives you a competitive edge in this already competitive industry.
Follow these steps and you will be on your way to a successful real estate empire. Understand that investing in real estate is a tough process that requires a good plan and proper capital. Follow these steps and you will see that by being prepared with knowledge, getting professional help and securing capital you will be a mogul in no time. Go ahead and start investing in real estate. It is a great source of ROI as well as consistent income.