To understand the essential elements of real estate investment, economics, and risks, you can compare it to playing a board game like Monopoly.
If you’ve played the game before, you know you must purchase properties, stay on top of your game, generate revenue, and acquire even more properties to win.
However, remember that simple doesn’t necessarily mean easy. Any real-life investment requires more than just following your guts and intuition.
You have to have specific knowledge and execute some action plans. Sure, investing can be straightforward, but expect to face hurdles, and if you take many risks, there will be some failures.
Our article guides you to start the conversation about investing in real estate, which will most likely happen once you have bought your own home.
Investing in real estate is often a retirement strategy. For example, when you’re ready to retire, you can liquidate funds by selling a property or more. How you choose which home to sell may be founded on location. For example, you may need to answer whether I should sell my house in Jacksonville or New York or sell the rentals in other desirable locations to get the maximum sales price.
When you have rental properties, you have more options for funding your retirement.
Plus, it’s never too early to start investing in real estate. Start your education by researching keywords online, joining property discussion forums, and using these tips and valuable information on PropertyTalk.com.
Assess Your Financial Standing
If you want to invest and grow your money, one popular option is real estate investment. However, it would be best to consider your overall financial picture before moving forward with it. Although there are ways to invest in real estate with no money, checking your finances beforehand is necessary.
So how do you assess your financial health?
Calculate your net worth by adding all your assets and deducting your liabilities. Conveniently, some software and easy tools help you with this.
Income and Expenses
Once you know your worth, it’s time to figure out how much you’re earning and spending. Next, determine your other expenses and check where most of your money is going. Finally, work with a qualified financial advisor or accountant to determine how much you can borrow. It always pays to know your financial position and borrowing power ‘before’ you start your rental search.
Now it’s time to evaluate your investment strategy once again. First, ensure that it’s on par with your current financial standing and goals. Then look at what type of investments work for you in your current position.
Purchase Real Estate Investment Trusts (REIT)
Real estate investment trusts (REITs) mean that you own, operate, and finance income-producing properties. With REITs, every investor can access valuable real estate, which is somewhat similar to a mutual fund—an investment mutual fund pools investors’ money to buy stocks, bonds, and other assets.
In general, REITs follow a straightforward business model. It generates income by leasing office space and collecting rent from its real estate, which is paid dividends to shareholders.
Now you may ask yourself, are REITs an intelligent investment for you? So, here’s the catch. Historically, REITs have generated high, steady dividend income and capital appreciation based on their long-term stability. In addition, they diversify real estate portfolios, which lowers risks, and increases return on investments. These are what make REIT-based real estate investment attractive.
DIY – Choose Your Rental
Real estate prices vary from different locations, so it’s normal for investors to wonder whether to invest near their homes or in another area.
Begin evaluating the property listing markets near your home. Can you afford the rental type you want in your most desired area? If no, consider surrounding areas or even further if affordability is genuinely problematic.
Another strategy is to target smaller niches in your overall market. For example, consider a different type of home, e.g., condominiums, mobile homes, and tax liens.
Work With A Real Estate Agent
Once you’ve decided to become a real estate investor, speak to a local real estate agent in the area you want to purchase your rental. You need to communicate with many real estate agents in different locations to know how attractive the sites are for rentals.
After acquiring property and having it leased, it doesn’t mean you need to collect monthly rent and check in on them only a couple of times a year. For one, at any time, you may be faced with a rental property sitting empty for months. Of course, you’ll be planning to minimize the vacancy rates of your rentals. Still, you also need a contingency fund or excellent cash flow to pay the financing repayments if a property is vacant for a substantial period.
Also, make sure you have funds for maintenance, repair, and replacement. No home is maintenance-free, and the Landlord’s responsible for providing a home that is fit for purpose.
All investments incur risk. Plus, there isn’t an investment that doesn’t need due diligence and the input of experts in areas like funding, property search, and management.