Real estate investing may seem like a glamorous job, but actually, there is a long way to go before you can become a landlord. Just like with any investment, you need to be prudent and cautious with your plans so you can always stay in the plus. There are certain pitfalls all beginners should avoid like letting your heart decide instead of your head which can lead to debts and more expenses.
However, everything is easier if you know how to get started with real estate investing. And here are some of the highlights you should especially concentrate on when embarking on this endeavor.
Define the budget
Every investment you make should start with defining the budget. It will tell you what kind of property you can buy and how you can manage the additional costs. Tax, bills, renovations, and other expenses are also something you should have in mind when planning your budget. Ask your bank to give you a pre-approval of a loan so you would know how much money you can borrow.
Also, it will help you establish affordable neighborhoods, condition of the property and its size when you start hunting for one. Don’t forget to include rates, general repairs, and insurance in your budget since they can surprise you if overseen.
Pay off your debts first
If you are looking for a bank loan, you are also after as a better credit score as possible. This means that your outstanding debts, like medical bills and student loans, can greatly affect that score. But the basic idea is to have your returns from real estate investing higher than your debts. Money management is crucial to afford not only buying the property but also turning it into a functional investment.
While you can pay off debts slowly through earnings from your investment, this is something not advised for beginners. So, be cautious with your finances and clear as much debt as possible before you plan investment in real estate.
Common sense before luxury
While luxurious properties do have appeal and will attract renters, they are trouble for beginners in real estate investing. Therefore, you should make sure the place makes sense before luxury meaning that you need to concentrate on functional and clean rental property. You can always renovate and remodel later to add more stylish features, but right now it’s about staying on top of your expenses.
Make the property attractive
Even houses with minimum renovations require certain elements to be attractive for renters. While this is an additional investment it will also help you get better and responsible tenants, as well as higher renting price. Thankfully, this is something that doesn’t have to cost much.
The most important issue here is to keep the bathroom and kitchen clean and in good shape. Think of it as though you will live there yourself if you have trouble to decide on what to invest. Fresh paint in neutral tones and nicely done flooring is also something that tenants will value. But remember that you can define the rules, meaning that tenants can do some changes and bring their furniture and devices.
Finding the right property
The greatest trick in real estate investing is finding the right property. This is preferably: a house that doesn’t need big repairs and renovations so you can start profiting from it quickly. A prudent property investment includes weighing on the pros and cons before signing the deal.
At one point, people made a quick profit from renovating and turning properties over. However, in a slower economy, trying something like this is risky especially if you depend on loans. Additionally, look for the properties in the neighborhoods that are in high demand for renting. Investing in a property close to university and schools is always the right move since these locations are attractive to renters.
Hire a property manager
As a beginner, you should always use all the help you can get to make real estate investment success. One of the ways to do so is by hiring a property manager who will help you understand the market better and gain as much as possible from this business venture. As a licensed real estate agent, the property manager will give you legal advice, manage your tenants and be responsible for maintenance issues.
Also, they will make sure that you find the right tenant for your property and perform all the necessary background checks. Your property manager will make sure that tenants take care of your property, as well as that they are well taken care of. Additionally, you can pay a property manager with a percentage of the rent which is usually tax-deductible as well.
This guide for beginners is an excellent way to get started with real estate investing and be smart about it. While you can’t eliminate all debts, you can at least start being more financially responsible with a planned budget and responsible investing. Just remember that it takes time to profit so keep your expenses to the minimum and be patient.