Its pretty common knowledge that real-estate is and has been a very sound investment for decades. It an asset that actually increases in value over time, it does not depreciate, or it at least, it does so rarely. It’s a great source of passive income and, if needed, you can always sell it if you are in need of cash.
Now of course, if it were this easy to get rich over real estate, everybody would do it. For this reason we have taken the liberty of writing up a couple of tips for beginners who are just starting out on their real estate investment journey.
Pay off any debt you might have
First things first – you want to pay off any and all debts you have. This means student loans, medical bills, college investments, and even money you might have loaned form friends and family. Caution is key here, you need to always be in the black. Keep your returns from your real estate greater than what your debt actually costs. Manage your money so that you always have a kind of safety net, some room for error.
Now, long time experienced investors use debt as a means to get better results. However, these people have year, if not decades of experience in these matters, and emulating them now (instead of where they were at the beginning) is a very bad idea.
How much purchasing power do you have
Now, with real-estate, things aren’t just about purely having money in your bank account. Namely, one important term to consider is leverage. Leverage means you will be creating an opportunity for someone else to pay of your loan for you. The most common, and rather effective, way to do so is to have your tenant pay rent, and then said rent is used to pay of your loan.
Flipping isn’t for beginners
It isn’t easy choosing the right property investment. There are many options, and you need to educate yourself on every single one if you want to learn. One of the cheaper options is buying a fixer-upper and seeing where you can go from there. However, no matter how tempting that is, flipping houses is not easy, nor is it simple, when you do it at the beginning.
In order to flip house you need to either have a very good, skilled contractor who can do work rather cheaply, or If you yourself have some experience in large-scale home renovations.
Don’t forget about the down payment
You can expect much more severe requirements and obligations when it comes to getting piece of real-estate. Namely, they usually require larger down payments compared to owner-occupied properties, as well as stronger and more intense approval requirements. A 20% down payment is not only not unheard of, it’s pretty much part and parcel of this trade.
Keep an eye on interest rates
Interest rates are pretty unavoidable, but that doesn’t mean you should be completely lax with them. Keep an eye on your interest rates, see how much they increase, when, and on what basis. Sure, borrowing money now is easy, but you haven’t achieved much if you have to pay off interest for years, and wait for far too long to actually make money on your investments.
Think of ongoing costs
You will need to think of interest rates as your primary annoying ongoing cost. However, you also need to keep in mind things like repairs, insurance, maintenance. Anything from simple lawn care to winterizing the home, from having the gutters cleaned out regularly to having inspectors check out the foundations and the basement after serious rainfall and storms.
Furthermore, you might need to pay certain municipal costs, expenses that are tied to the community or the neighbourhood within which you the real-estate you bought belongs to.
Get it in an area that is growing
You want get your real-estate in an area that is going to grow in value quickly, soon. You want to get it in a place that has strong demands for renting. So, places near universities, schools, or just places where people will want to live can help you get your money’s worth.
Investing in real-estate can give you amazing results, as long as you stick to some basic rules and tips. So, get your investment in an area that is growing in value. Always keep in mind that interest rates will haunt you if you let them get out of hand, and the same goes for nay ongoing costs. Try to avoid flipping houses unless you have experience, and finally, don’t forget to keep your purchasing power in consideration.