Talk To A Lender About Your Options
Assuming you want to invest in real estate directly by purchasing a property youll also need to talk to a mortgage lender. Explain the type of investment youre aiming for, ask about loan options, and find out what it will take to get qualified.
Your lender will be able to give you a detailed breakdown of your future mortgage costs, and that will help you understand the cost vs. potential benefit of your new investment property.
Ready to get started?
The Best Real Estate Investing Strategies
In my opinion, the following are the 15 best real estate investing strategies.
To make them easier to understand, Ive divided each of these strategies into groups based on how theyre used. These groups include:
- Business strategies
- Debt strategies
- Passive strategies
Ill now unpack and briefly explain each of these 15 strategies. When possible, Ill provide links to other articles and resources to help you use each of these strategies if youre interested.
Residential Properties Purchased By Foreign Buyers In The United States
According to a report published in 2017 by NAR, Chinese buyers have been the top foreign buyers of U.S. residential property for three straight years, hitting a record high.
The below data has been taken from the report published by NAR .
For the new foreign real estate investors, it is important to know that in the United States, real estate listing information is shared by agents using multiple listing services, and consumers can access that same information using real estate sites such as Zillow. Each state in the US has its own set of rules regarding the purchase of the real estate, including the type of purchase contract used, the method of closing the sale, and even the duties and titles of the individuals involved.
Make the most of your investment dollars in 2021 by investing in real estate. Our analysis of the 20 best cities to invest in real estate was based on the most recent housing market trends, rate of appreciation, rent prices, job growth, economy dependencies, quality of life, etc. Please note that real estate prices are deeply cyclical because their demand side is impacted by economic cycles. Much of it is dependent on factors you cant control. A recent example is COVID-19 which has impacted our economy. Therefore, many variables can potentially impact the value of real estate and some of these variables are impossible to predict in advance.
Review: Top 10 Markets Over The Past 18 Months
Gary Beasley is the CEO and Co-Founder of Roofstock. A year and a half ago, he wrote an article for Forbes titled Secondary Cities Make Up The 10 Trending Single-Family Rental Markets For Investors In 2019.
Buying A Multifamily Home
Many peoples first investment property is a multifamily home. When you buy a house with 2, 3, or 4 units, you get the dual benefit of owning a home to live in as well as one or more investment units that can be rented out.
Even at the start, you might find that the rents you receive more or less cover your mortgage. And, as time passes and rents rise, you could find yourself with a worthwhile income.
As long as you plan to live in one of the units yourself, you can use just about any mainstream mortgage to finance a multifamily home with up to four units. Options might include:
- Conventional loan: 320% down, 620 credit score minimum
- FHA loan: 3.5% down, 580 credit score minimum
- VA loan: 0% down, 580620 credit score minimum
Keep in mind that there can be challenges with this method. Tenants have to be found and screened, repairs have to be made, maintenance has to be done, rents have to be collected and chased, and so on.
And, unless you have the money to pay someone else to do this stuff, it will all be down to you. A typical property manager can cost you around 10 percent of your rents received, adds Meyer.
So before you go this route ask yourself, Should you become a landlord?
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The Power Of Leverage
With the exception of REITs, investing in real estate gives an investor one tool that is not available to stock market investors: leverage. If you want to buy a stock, you have to pay the full value of the stock at the time you place the buy orderunless you are buying on . And even then, the percentage you can borrow is still much less than with real estate, thanks to that magical financing method, the mortgage.
Most conventional mortgages require a 20% down payment. However, depending on where you live, you might find a mortgage that requires as little as 5%. This means that you can control the whole property and the equity it holds by only paying a fraction of the total value. Of course, the size of your mortgage affects the amount of ownership you actually have in the property, but you control it the minute the papers are signed.
This is what emboldens real estate flippers and landlords alike. They can take out a second mortgage on their homes and put down payments on two or three other properties. Whether they rent these out so that tenants pay the mortgage, or they wait for an opportunity to sell for a profit, they control these assets, despite having only paid for a small part of the total value.
Why Does Oer Matter
A lower OER reflects that youve minimized expenses relative to revenue. If your OER has been rising over time, it could indicate many issues. Perhaps annual rent increases havent matched expense increases. Or, your management company isnt keeping up on routine maintenance, leading to more serious problems down the road. Calculating OER using specific expenses can help you narrow down the reason for its rise and help you get it back under control.
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What Is An Reit
A real estate investment trust is a company that owns, operates, or finances income-generating real estate. Individuals can invest in an REIT and potentially receive dividends from their investment. Equity REITs own the underlying real estate, while mortgage REITs don’t own the underlying real estate. Instead, they own debt securities, which are riskier. Hybrid REITs combine equity and mortgage REITs.
Rent Out Space In Your Home Or On Your Property
This is probably the easiest way to make money in real estate through direct participation. If you already own a home, you can pick up some extra income by renting out space.
Im saying space for a reason. Most people think in terms of renting out a room to a border. Thats one way to do it.
You can also rent out part or all of any of the following:
- Your basement
- An outbuilding on your property
- A corner of your land
Any of these rental arrangements can provide an extra income source, in the same way as renting a room to a border. People and businesses have all kinds of space needs. In a lot of cases, they just need extra space to store their stuff or vehicles.
This is easier to do in some locations than in others.
If your home is located in a rural area, an older downtown area, or in a community that has lax property use restrictions, this can be a real alternative.
But if you live in a suburban area, with tight property use restrictions, youll run into legal obstacles. And if you live in a neighborhood with a homeowners association , dont even think about it.
But if your house is located in the right area, and you have extra space, this is a pretty easy way to make extra money in real estate. Knowing where to invest in real estate is key to success in your real estate ventures.
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Pro Tips If You Want To Invest In Real Estate
Expert advice on jumping in to the real estate market as an investor, from Policygenius experts and interviews:
Learn your market. Once you choose a market, connect with other local real estate investors to learn the local landscape. âFinding good deals in real estate is like a treasure hunt,â says Chad Carson, author of âRetire Early With Real Estate.â He recommends starting your hunt by talking to other people who have already searched in the areas that youâre interested in.
Donât forget about insurance. Obviously you have to insure any house you buy, but there are special considerations if youâre buying a house to rent out, says Policygenius homeowners insurance expert Pat Howard. Before you get tenants in, youâll need to get rental property insurance, also known as landlord insurance.
Donât limit yourself to online listings. Once you have a neighborhood in mind, hit the pavement. Carson has knocked on doors and left notes for the current owners of properties heâs interested in. âIâve had people call me seven years later,â he says. âItâs a long game.â
Make a plan. Real estate investor Alex Allison always advises new investors to make a plan. âSociety has been trained to assume real estate is always a sure thing,â he says. âAnd yes, real estate investing has a return on investment, but there has to be a calculated, smart plan in place and an understanding that real estate moves in cycles.”
Read These To Know What To Look For
What’s the most important thing to look for in real estate? While location is always a key consideration, there are numerous other factors that help determine if an investment is right for you. Here’s a look at some of the most important things to consider if you plan to invest in the real estate market.
Use Real Estate Investing Software
One of the biggest challenges of flipping homes or finding rental properties in North Carolina is finding great deals. But the DealMachine app is one tool that can really help you.
DealMachine’s real estate software helps North Carolina investors find and research distressed homes , and get in touch with owners fast via batch skip tracing and direct mail campaigns.
DealMachine’s driving for dollars app is fast and easy to use. When you’re driving around town and spot a home that could be a great deal, you can send the owner direct mail through the app for huge time savings .
to find undervalued North Carolina properties as you drive around town. The company offers a 7-day free trial and $15 in free credits that can be used towards marketing .
Swansea Asset Type: Fixer
Proximity to Transit, Highway, Park, Lake, and Downtown made this little pocket west of Highpark in high demand, yet still more reasonable compared to other areas such as Highpark and Bloor West Village. In my experience its better than Bloor West Village and High Park. It has been all about High Park . A comparable Detached or Semi Detached in Highpark is around 20% higher than the comparable property in Swansea . $1.6M to $2M can get you a nice Detached home in this area, which is a great place to invest in Detached properties in Toronto.
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Airbnb And Vacation Rentals
The demand for home-away-from-home rentals had taken off in recent years as many travelers preferred this option to staying in a hotel. Homeowners could earn income by renting out a house or even just a room on a short-term basis, especially if the property is in area that’s a well-known tourist destination. It’s unclear when that market will return. But should it reappear, keep in mind that short-term rentals are regulated and sometimes even banned in certain cities. Check your city’s bylaws before listing a property on a website such as Airbnb, VRBO, or HomeAway. And also figure in what additional deep cleaning and sanitizing between guests will add to the costs.
Why Does Net Operating Income Matter
Investors use NOI solely to judge a buildings ability to generate revenue and profit. It tells you if a specific investment will generate enough income to make mortgage payments.
For an actual case study with NOI calculations and more insights, check out our article on What is Net Operating Income?
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Should You Be Careful Buying Real Estate
I think its advisable for investors to be very cautious right now. Finding an underpriced home to rehab and flip or buy and hold for rental income is very difficult at the moment.
As an investor, though, if the numbers work, the numbers work. If the property and location meet the requirements of your investing strategy, theres no reason not to move forward. In fact, interest rates have only one way to go up.
Buying now and locking in a historically low-interest rate for 30 years might just prove to be a very smart move if your strategy is to buy long-term rentals. But you still have to buy smart to be sure youre able to maintain the property. And you need to rent to a reliable tenant to support the mortgage, taxes, and insurance each month.
Be Prepared To Negotiate For Investment Properties
Its more than likely that the seller will come back to you with a counteroffer. Thats just part of the negotiations. Its up to you whether you can comfortably accept their counter, respond with your own counteroffer, or walk away.
Keep your finances in mind and dont let yourself get carried away in the excitement of buying your first home. No matter how much you might think a house is perfect for you, if you cant comfortably afford it, its time to think twice.
Remember buyers: you need to know what a home will require in order for it to be up to your expectations of build quality. Houses may need a few things fixed either prior to purchasing a home or immediately after. Its important to be aware of these issues, as it may cause a headache further down the road after youve purchased the house.
Often, if the seller is motivated enough to sell the house, they might work with you and include fixes and light renovations as a stipulation in the contract for the sale of the house. Making sure you have inspectors and independent contractors to inspect the house for any major issues can help save you a headache in the long run.
Ensure you dont bid either too high or too low on the house. Bidding too high will probably get you the house quicker, but you may end up paying over market value for the home and will probably have to recoup that cost before you can be in a suitable position to generate equity into the home.
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What Is The Best Type Of Real Estate Investment
The best type of real estate investment will depend on your individual circumstances, goals, market area, and preferred investing strategy. While many investors want a more straightforward answer, determining the best type of investment property is a subjective process. Choosing the right property type comes down to weighing each options pros and cons, though there are a few key factors investors should keep in mind as they seek the best choice.
When choosing the best type of investment property, the importance of location can not be understated. Investors operating in up-and-coming markets may find success with vacant land or new construction, while investors working in more mature markets may be interested in residential properties.
Aside from location, investors should also be aware of their own preferences when it comes to investing. Assess your preferred level of involvement, risk tolerance, and profitability as you decide which property type to invest in. Investors wishing to take on a more passive role may opt for buy and hold commercial or residential properties and employ a property manager. Those hoping to take on a more active role, on the other hand, may find developing vacant land or rehabbing residential homes to be more fulfilling.
How To Determine The Best Places To Buy Rental Property For 2022
If youre wondering where to buy real estate in 2022, this article is for you. But before we launch into our recommendations for where to invest this year, there are a few things to note.
First, understand that the best real estate market for you may not be the best one for your neighbor or your coworker. Where you end up investing will depend largely on your personal investment goals.
In my decades of experience buying single and multi family rental properties around the United States and abroad, Ive found that the best cities to invest in have three factors in common: job growth, population growth and affordability. When you find a market that has all three, youll probably be able to find good investment opportunities for both cash flow and appreciation.There are several cities across the United States where these factors exist today places where you can buy high cash flow rental property while prices are still low , and watch your equity grow.
In this article, youll learn about 21 of these best real estate markets for the year 2022. Find out what makes them great places to invest and why.
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