Ever thought about buying property to renovate and flip or hold and rent? Don’t know where to start? Starting as a real estate investor can be a daunting task and is completely different than investing in the stock market. Here are 10 tips to start your path as a real estate investor.
1) Know your budget – The price of the investment property is only the beginning of the expense. If financing, talk to a broker that is knowledgeable in investment property. They can give you guidance in costs to obtain the loan and monthly mortgage expenses. Make sure you have an inspection done to know what repairs need to be made and any other hidden gems (mold, insect infestation, structural damages). Do research on tax impacts of real estate investing on both a local, state and federal level.
Determine what carrying costs will be for vacancies (utilities, home owner associations, insurance, maintenance, marketing, management fees, and mortgage costs). Make sure to factor that into the budget.
Do your research to determine what the property would rent for. What return are you looking for? Make sure opportunity costs are factored into that return and get your rental rates priced right to minimize the vacancy costs. Is the neighborhood appreciating or depreciating?
2) Talk to other investors – Get feedback on your questions from other investors. Many cities have investor networks that are looking to collaborate or mastermind with. Look on Facebook, Meetup or other sites to find a meeting. If you have questions, they can be a good place to find guidance.
3) Know the history – If buying property where a tenant is in place. Find out more about it. Payment history, repair requests, damages, background, lease terms. This can affect the terms of the contract and factors into your budget and goals.
4) Know your exit strategy – How long do you want to own and rent this property? What are your 1, 2, 5, and 10 year horizons? Is this a stepping stone to buying other properties? Is this going to help with your retirement plans? What are you going to do when you no longer want to invest?
5) Build your team – Surround yourself with professionals that can help you throughout your journey. Consult a Realtor, financial planner, tax specialist, mortgage broker, property manager, building inspector and attorney, among others. Make sure they are knowledgeable with investment property.
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