How to Get Started in Real Estate Investing

Are you thinking about getting started in real estate investing? Well if you do it correctly, your first investment property has the potential to be quite profitable. I cannot think of any reason a newbie real estate investor cannot profit from a small, purchase to start off with. Home values are rising at a rate of 3.9 percent year after year, and expectations have them rising another 2.6 percent over the next year. If you’ve been considering real estate investment, now is the time to throw down some of your savings towards some real estate.

 In order to start the right way, you’ll need to make some executive decisions. Here’s how to go about this.

 Assess your current finances

 Usually the standard percent to put down on a property is 20%. To avoid having two mortgages, let’s be responsible and save/wait until we can afford the property outright. Yes, this will require a large amount of cash, and much discipline, but to skip the lender and avoid interest rates, you might opt for a foreclosure listed below the local market median.

If you have no need for a mortgage, you should consider living in your investment property so the owner-occupant rates can be fully utilized. This is only temporary living. One year will lock in the lower interest rates for the remainder of the mortgage. If you live in your property, the rates are much more favorable than a second home, or rental property loans.

For those lucky enough to purchase multiple income properties at the same time, it’s vital to choose the right financing. In this situation, it is recommended you use cheap 30-year fixed rate mortgages and buy as many properties as possible.

 Determine the potential cash flow

 Watching popular shows that show you how to flip houses make this task look pretty easy. Usually most homeowners profit little or none at all when they sell shortly after closing. Obviously making major renovations on a flipped home does increase the value and make for short-term profit, but extensive upgrades do cost a great sum of capital. Unless you are capable or experienced in large-scale home improvements, do not assume you can flip a house by yourself to benefit immediately.

Renting out the property on the other hand is a long-term strategy. You will need some serious calculations to determine your pricing when it comes to covering the mortgage and homeownership costs. You will probably figure in the profit, but that doesn’t truly begin until the mortgage is paid off.

Today’s renting market is extremely competitive and expensive. If you want to be a landlord for the long-run, it could be financially wise to rent your property out at least until median sale prices in the region peak.

 Choose your investment type

 Most investors default to considering individual direct ownership as their only way to profit from real estate. However, this is not true. Partnerships and publically-traded investment trusts are designed to help run the investment on their own. The beauty of a partnership is it benefits individuals with similar investment interests who aren’t ready to dive in head first. Real estate investment trusts (REITs) enable investors to fund multiple real estate projects simultaneously without the daily hassle of being a manager.

 REITs can act much like a stock. In that they have room for gains and losses. There is the ability to raise rent during inflationary times, which is a little different than other investments. REITs have done quite well in the past few decades, approximately appreciating 13 percent every year.

 Ultimately your financial situation, estimated profit margins and choice of investments are all connected. If you are beginning with $10,000 of a million dollars, the key is success is staying informed within the industry.

 Best of luck!

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