First Time Investing In Real Estate? 3 Easy Ways to Get Started
Buying
Thinking about buying your first investment property can stir up some anxious feelings. Investing can also be a big and important decision. How do you know if it’s the right location? Is it going to make enough money? Are you spending too much initially? When is it time to get out?
With all these questions and worries, how do you take that first step and overcome your fears to begin investing in real estate? Here are 3 simple steps to get you started.
Spoiler alert: Fund the property. Find the property. Cash flow the property
Step 1 Beginners Guide to Investing In Real Estate: Fund the Property
One of the first considerations is to narrow down your goals and determine what types of investment properties you’re interested in. Are you looking for a rehab property that you can fix up and sell quickly for profit? Maybe you’re looking to buy a vacation home that can be rented out the rest of the year for a profit.
But before you even start looking around at investment properties, you should have a full understanding of your credit profile. Identify any issues that need to be addressed before applying and what you’ll need to do (if anything) to improve your chances of securing an investment property loan.
If you have already gathered your paperwork and completed your due diligence, it’s time to get pre-approved for a loan. It’s essential that you get it in writing which can be very helpful when it’s time to start negotiating with the seller for the purchase of a property.
Now…it’s time to dive in and start looking.
Step 2 Beginners Guide to Investing In Real Estate: Find the Property
It’s not always as easy as it looks on TV. When looking for your first investment property, be careful. Embrace the 70 percent ARV rule.
The 70% of ARV (after repair value) formula is used as a barometer by many real estate investors when purchasing a ‘fixer-upper’ property for profit. It’s basically the amount of money the property will be worth once the repairs are completely finished. Although it’s not a one-size-fits-all model, this formula will help you determine what price to pay in order to make money from your investment.
Once you identify your property that fits the 70 percent purchase rule, engage professional contractor opinions and see it in person to confirm that the amount of money in repairs necessary is going to be true.
Now, it’s time to secure the money to purchase it. Quickly.
Or else someone else will.
Step 3 Beginners Guide to Investing In Real Estate: Cash Flow the Property
If you stay steadfast to your seventy percent rule, you’ll be able to cash flow it. But you must also identify an exit strategy to minimize risks and maximize profits.
Whether you choose a fixer upper that you want to flip fast or a property that you’re looking to rent out, knowing how you’re going to exit your real estate investment is just as important as entering them. As with most things in life, it’s important to have a backup strategy. A “plan B”.
Investing in real estate is no different. Exit strategies, as the name suggests, are the clear, realistic plans in which the investor intends to remove himself (or herself) from a real estate deal. And keep in mind that developing this strategy is best when done at the onset when conditions are favorable (rather than under duress).
Investing In Real Estate? We Can Help!
Whether you’re looking to start investing in real estate, buy your first home or relocate, lean on a professional realtor to help you through the process. Before you take the plunge, do your homework… and start with the end in mind.
