If you’ve considered becoming a real estate investor, let’s look at ways to invest and what’s needed to be successful.
Buying income-producing property with stable cash flow is the most popular way to invest in real estate.
While positive cash flow is important, buying and holding over the long-term can reap the rewards of potential windfalls years or even decades from today.
These properties typically need repairs and updating. The fix-and flip strategy requires buying low, accurately estimating the cost of repairs, managing
completion of the work needed, and then selling the property for more than the amount invested. This can be easier said than done.
Real estate wholesalers find highly motivated sellers in distress, accurately estimate the repair cost and fair market value of the home, then assign the contract to another investor in exchange for a fixed profit.
Crowdfunding and Real Estate
Investment Trusts (REITs) Real estate crowdfunds collect small amounts of money from a large number of investors to purchase and manage large and complex income
producing properties. Shares in publicly traded REITs can be found on the major stock exchanges. Investors receive a small pro-rata share of the quarterly cash flow and profit when the property is sold.
Investors need a knowledge and understanding of these market factors:
• Fair market property values and trends.
• Market rents to gauge income potential and cash-flow.
• Understand that money is made in real estate when the property is bought, not when it’s sold.
Investing in real estate can require more cash than expected, so having access to working capital is critical.
Plan on investing at least 20% down for a rental property. Set up a separate account for repairs and maintenance. Consider the loss of cash flow created by tenant vacancies.
Learn the local real estate rules and laws to avoid potential problems and litigation.
• Eviction processes vary from place to place and may limit your rights as a landlord.
• Conducting background checks helps avoid renting to problem tenants.
• Rental security deposits and prepayments may have amounts capped by local landlord-tenant laws.
• Insurance coverage for rental property should include general liability coverage that protects you against claims from the tenant or the tenant’s guests.
Becoming a real estate investor also involves:
• Finding the right property that makes sense! This can take a lot of time and effort, and it’s harder than it appears on HGTV.
• Developing a track record of proven success in order to raise investment capital using other people’s money.
• Developing a list of go-to vendors and service providers. Many are booked well in advance and have established relationships with industry professionals.
• Following Fair Housing laws. This can easily turn into a full-time job. Successful real estate investors often hire professional property managers who specialize in the local market.
Are you ready to become a real estate investor? Call me and let’s discuss how you can get started!