How to Succeed in Real Estate Investing
Most investment experts will tell you that while the value of stocks can grow at a quicker rate than real estate, real estate is generally the better investment.
However, that doesn’t mean that buying an piece of property and waiting for it to appreciate in value will work in your favor. If you want to become a successful real estate investor, it’s going to take some know-how.
We’ve compiled information and advice from the most successful real estate investors to give you an easy-to-follow guide on beginner’s real estate.
Read on to get started on your journey to becoming a successful real estate investor, yourself.
Get to Know the Real Estate Market
Before you run out and purchase the first piece of property you come across, take some time to learn about your investment area. Even if you stay up to date with national real estate trends, you need to know what’s happening closer to home. Each local real estate market can enter into a different phase of the overall market cycle and can require unique considerations.
Timing is key if you want to invest successfully in real estate. If your local real estate market is going through a seller’s market, it’s best to wait for that cycle to end. In a seller’s market, houses are sold above property value to competitive buyers–and these are not ideal terms for an investor.
While housing is a necessity worldwide, not all neighborhoods or towns are suitable for real estate investing. Ideally, you want to invest in properties in areas with:
- low crime rates
- a stable or growing economy
- good schools and/or universities
- access to healthcare
- access to stores and shopping centers
- walkability and/or good public transportation
Locations that meet these criteria are considered desirable places to live. A steadily growing population will fuel the housing market and drive property values up.
Look for Low Prices on Promising Properties
What makes real estate a good investment? There are always opportunities to buy properties at a low price and foster conditions that will raise that value over time. One surefire way to make this happen is to follow the BRRRR method.
Where can you find properties that lend themselves to the BRRRR method? Let’s take a look at two common options.
Should You Buy Foreclosures?
Many real estate investors pull properties from the foreclosure auction line, where it’s easy to find desirable properties at an extremely low price. Why is the price so low? These properties usually need a lot of work.
As you grow your real estate investment portfolio, you can go this route. We don’t recommend starting out with houses that need tons of expensive renovations, as you may not have the financial backing to ensure stability in the face of huge upfront costs.
How to Track Down Unlisted Properties for Sale
One option that we always recommend is finding unlisted properties from sellers who want to sell fast. People who are going through a sudden change of life and need to sell right away are often willing to sell at a low price in exchange for a quick decision. Working with an agent is the best way to track down these “hidden” properties for sale.
Prepare for Upfront Costs Before Investing
One of the biggest mistakes you can make when purchasing your first investment property is failing to prepare for the upfront costs. First, make sure that you’re not relying on your life’s savings to make the purchase. Second, make sure that you have a realistic estimate of how much it will cost you to make the investment.
We recommend offering a downpayment of at least 10% to avoid long-term debt. 20% is better because it eliminates the need for mortgage insurance and lowers your interest rate.
However, the downpayment is not your sole upfront cost. If you’re following the BRRRR method, you need to prepare for the cost of renovations. Even if you’re buying a move-in ready property with the intention of renting it out ASAP, you’ll need to prepare for the cost of advertising, tenant screening, and more.
Don’t Outprice Your Market
Another reason that you need to familiarize yourself with your local market? You need to know how far to take your renovations and what to aim for when raising the property value.
A property that sells or rents for below the surrounding property value yields less money, of course, but does provide a competitive edge. However, if you raise the value so much that it outprices the market, you’re going to struggle to find willing buyers or renters. You want to make your property the most desirable within your market, and if people aren’t paying for luxury in your market, you shouldn’t shoot for luxury.
Don’t Forget Non-Residential Options
Many of us automatically think of single or multi-family residential properties when we think of real estate. However, these are not your only options. Depending on the location you are investing in, you may find that non-residential alternatives represent an untapped and lucrative market.
Examples of non-residential options include things like storefronts, office buildings, warehouses, and storage lots. Vacant land is also rising in value, particularly in areas experiencing rapid development. Don’t rule out non-residential properties as you work towards becoming a top real estate investor in your region.
Become a Successful Real Estate Investor With Our Simple Tips
Real estate remains one of the best investments you can make. However, planning and strategizing are key if you want to become a successful real estate agent and our tips will help you do exactly that.
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