Do you like the idea of becoming a brave investor embarking on your next real estate adventure? Are you starting out but don't have enough cash or a clear idea of which way to go? What to do based on the amount of money you have and what you want to get from the experience?
When it comes to starting to make real estate investments, the golden rule is to know the area where you invest in order to determine the best time to buy or sell based on the rise or fall of property prices in the area where you are.
With that said, let's go over how to get started in real estate investing easily.
Be clear about your investment level
The first step before embarking on a real estate investment journey is to analyze how much you need to make your investment. Next, you have to know the best route depending on your available funds. Start investing in properties It is easy even with little, since then you can advance in the real estate investment arena.
Know your level of risk
Real estate houses a powerful long-term investment with many possibilities for financial returns, but like most investment opportunities, it also carries some risk.
When you start investing in real estate, answer the following questions:
If your investment includes renting part of your primary residence, how about the idea of allowing potential strangers to stay for the short or long term?
Are you aware of recessions in the housing market, such as rising mortgage rates or falling house prices that could affect the money you have invested in real estate investment funds (REITs) or your ability to sell? a renovated house for profit?
If this happens, you will have to wait for the market to stabilize again.
Also, a property entails repairs, maintenance and possible problems with the tenants, do you have six month rental reservations to cover the costs?
When evaluating the risks of your investment, also consider how to combat them. If your investment is a rental property, it is a good idea to hire a property manager.
Usually, it is advisable to buy something newer to avoid excessive maintenance from the beginning. And you can avoid additional risks by purchasing property through an LLC to protect your personal assets.
Evaluate your liquidity
Liquidity is understood as your ability to convert your investment into cash. When you start with real estate investments, you must be clear about what you use your investment for and how quickly you need to make a profit. So you can understand what type of investment suits you.
If you need cash flow you can generate income from the first month through rental properties and the rental of your own house.
If you plan long-term, you can take advantage of property appreciation or a home's increase in value over a period of time. By buying a rental property to sell later and lease in the meantime, you are making both a short-term and long-term investment.
Consider the best option for beginners
If this is your first time in the real estate investment business, you can opt for an efficient and low-risk choice.
When investing with little funds, you can place low stakes and low risk, starting from the bottom almost instantly with fast returns.
If you join a real estate investment group, here are the best entry-level options to consider:
Rent part of the house you already live in
This would include a guest room, a garage or even a basement, being able to share common areas with your tenant.
Costs typically include improvements needed prior to welcoming a tenant into your home and from 1% to 4% of the home's value set aside for repairs.
This is a low-risk option to start generating cash flow for immediately available funds, to help cover the cost of your mortgage, or to save for your next investment.
Become an Airbnb host
Similar to the previous option, with the difference that you are in charge of cleaning and configuring the rooms
As an Airbnb host, you have control over which part of your house to rent and when, whether it's just a part of the house so you don't have to leave during guests.
Investment in online crowdfunding
Platforms such as Fundrise and DiversyFund allow you to start with a real estate crowdfunding investment of only $500.
If you choose this path, keep in mind that these applications charge fees from 1% to 2.5% from their clients' managed assets; Although quick to start, these applications can take a long time to produce significant returns; and dividends from these investments may be taxable.
Go to the next level
If you have already made one or more real estate investments and want to go for more… there are always more opportunities!
It's your time to go from beginner to intermediate:
Buy a house
Whether you buy a new home, or if it is your first home, you are accumulating capital for your future.
Buy a rental property
You can do it to rent it exclusively to tenants, or you can buy a multi-family property where they live in one unit and rent the others, also known as house hacking.
The first option requires at least a 20% down payment and an investment mortgage loan, which comes with higher interest rates than owner-occupied primary mortgages, up to 0.5% to 0.75% higher.
The last option, depending on the price of the home, may be more affordable because it can be purchased for as little as a 3.5% down payment with an FHA loan because it also serves as the buyer's primary residence.