So you want to learn how to invest in real estate. With so many different books on the subject and experts claiming that you can make big bucks with real estate, you’d be surprised to learn that it may not be what you think.
I’m not saying you can’t make money with real estate but to do it is going to require a few things from you.
In this article I’m going to give you a place to start, I’m going to show you the skills you need to get started, the different types real estate investing, tips for getting started, and of course some of the downsides to investing in real estate.
Skills You Will Need
First off, you will need to learn a few skills to get started. Knowing these things can be the difference between making a bad deal to making great deals. You never know everything but these will give you a good place to get started.
- Finance. Knowing how to read the numbers on a deal is very important. You will need to know how mortgages work, how to calculate the value of a property, and what type of insurance you will need for the property.
- Appraisal Methods. Next, you should have a clear understanding of the different types of appraisal methods used to value a property. Without this knowledge, you will never be able to assess the value of a property.
- Property Management. Finally, you should also know how to manage a property. You need to think like a developer and see the problems with properties before you buy it. You also have to have the basic understanding of how to handle home wiring, plumbing, and simple property management. These skills will help you in maintaining a better property but also help you save some bucks as well.
Types Of Real Estate Investing
Next, now that we have a basic understanding of the types of skills you will need to get started to invest in real estate you need to know what type of real estate investing you plan to do.
- Flipping.Flipping is a short-term investing strategy where you buy a house that may be a bit outdated or run down and fix it back up and sell it a few months later. This can be a very profitable income if you know what you are doing but it may require a bit of cash flow up front to do it since you may have to make some major repairs to update the home.
- Buy And Hold. The second method of buying real estate is the buy and hold method. This is where you buy a property and rent it out for the long term. With the buy and hold strategy, you will have to manage tenants and property and over time that can prove to be profitable especially once you pay the loan off.
Tips For Beginners
Real estate investing for beginners can tough to wrap your head around with everything you got to know. However, if you follow the tips I will lay out for you here you will make a lot fewer mistakes. However don’t just take my tips, do your own research as well.
- Buy Low Sell High. The first tip to being successful in real estate is that you must always buy low and sell high. This is why you need to know how to value properties. For example, if a seller has a property for sale at $150,000 and you offer him $140,000 you may have a good deal or you may not. However, if you were to know how to value the property you might find that anything over $125,000 is overvalued for the area the property is located in and you may end up losing money on the deal.
- Buy In Good Neighborhoods. Next, don’t buy in places where they have high crime rates. These kinds of neighborhoods should be easy to spot. The reason you want to look for good areas is that will have to deal with less crime, drugs, and people destroying your property. On top of that you will be able to charge a premium for your rentals and in the long run, make much more money.
- Build a Team. Third, build a team to help you with your business. These people will be able to help you spot the deals and the losers you should avoid. These people will also help you walk your properties and may provide very valuable advice. To get started here are a few people you should look for, an accountant, an insurance agent, a developer, real estate agents, property managers, and a loan officer. Having these people can help you with your business. For example, working with several real estate agents can help you because they will be able to sift through hundreds of properties and find the ones that fit your criteria.
The Down Side To Real Estate Investing
Finally, there are a few downsides to real estate investing. Of all the sections in this article, this is one that is very important because if you can’t handle the downsides along with the good sides this may not be a business for you.
To start the first thing you will have to realize is that you will make mistakes at one point or another. You may buy a property at too high of a price or get bad tenants. Whatever the mistake you have to be able to keep pushing forward. If you can’t do that this business may not be for you.
This business is also a high overhead business. Over time you will accumulate thousands if not millions of dollars in real estate property. If property values drop you could lose out big. If you are not willing to spend some big dollars this may not be a business for you.
Finally, if you can’t see yourself evicting a tenant from your apartments this may also not be for you. To do this business you will need to have a thick skin and not be afraid to confront someone. I know everyone hates to play the bad guy but in order to win in this business, someone has to be.
Is this business for you? Can you see yourself doing this business, not just the good but the bad as well? If evicting people and spending large amounts of money scares you this may not be the business for you. However, if you can see yourself walking properties, placing offers, and working with your team investing in real estate may just be for you.