I talk to a lot of people who are wanting to jump into real estate investing but get overwhelmed with where to start! Like anything that’s new, there are steps to take that will make the process of diving into real estate less intimidating. They say information is power, so read on to get the Top 5 Things All New Investors need to do before purchasing that first investment!
Pick your Strategy
The first thing to do when getting into the real estate investment business is to understand the strategy you want to execute. Whether you’re looking to get into short-term investing, mid-term investing, long-term investing, house-hacking or fixing and flipping, determining what kind of investment you’re buying will shape most of your next steps. If you don’t have much time, a long-term rental may the best fit for you, as it’s the strategy with a more hands-off approach. If you’re looking to have your living expenses covered with your first investment, househacking would be the best choice, where you purchase a duplex, tri-plex or quadplex and live in one of the units. A fix and flip will require quite a different skillset, but can be extremely lucrative if you purchase off-market and sell for top of market. There are many strategies that can be quite lucrative, you just need to understand which will be the right fit for you and your goals.
Select an Area
Real estate is extremely local, so understanding the trends, prices, neighborhoods needs to happen at a local level. Do you want your investment to be 5 minutes down the road or do you live in a high-cost-of-living area and want to invest out of state? Once you narrow down the area you want to invest in, you need to research the neighborhoods in depth, looking at crime rates, rents, comparables and jobs in the area.
Research, Regulations & Laws
Diving into the details will be the biggest lift of your new investment. The location and neighborhood are major things you can’t change about the property, so making sure you know the ins and outs of the area should be a priority. Understanding the regulations in the area for permits, rental licenses, landlord and tenant laws is extremely important when investing in real estate. This information should be easy to find on city or county website or by Googling tenant laws in the city you are thinking about investing in.
Assemble Your Team
Owning real estate is a team sport and having the right people in your corner can make all the difference. Beyond mentors or other investors you chat with, you want a knowledgable Real Estate agent by your side. Someone with knowledge of the area and just as important, with knowledge around the strategy you’re trying to implement. An agent can help you determine market value, after repair value, and should have a network of trades at their desposal. If you plan to hire out your rental management, a top-notch, vetted property management company will be a necessity. And whether you are going to invest out of state or down the street, you will need reliable trades people who have great references. To vet these plumbers, electricians, handypersons’ before you actually need them is imperative!
Get Your Financials in Order
Understanding the market you’re going to invest in means realizing the price of the assets you’re looking at as well as the ARV (after repair value). Talking to a lendor who understands the type of investment you’re pursuing and the best options for purchasing will be huge. Knowing how much money you need to put down, the rate you’ll qualify for, if you need to wrap in the rehab, all questions you can ask your lender.
These are a few high level tips new investors need to dive into and explore before purchasing real estate as an asset. Any new venture can seem overwhelming at first, but putting one foot in front of the other, researching and putting your knowledge into action, with the right team behind you, can make all the difference!
Download 5 Things New Investors Need to Do – and if you have questions about investing, want to explore your options or find the right strategy for you, don’t hesitate to reach out!