Find The Right Property
Once youve done your research and youre ready to start investing, its time to find the right property. The key is to find a property that will give you a good return on your investment. There are a number of factors to consider when choosing a property, so its important to take your time and do your homework.
Youll also want to consider the location of the property. For example, is it in an area that is growing or declining? What is the surrounding neighborhood like? These factors can impact the value of the property and how easy it will be to sell in the future. If you live in Edmonton, a simple search like homes for sale Edmonton could bring you your first real estate deal
Its also important to consider the condition of the property. For example, is it in need of repairs? If so, how much will those repairs cost? Will you be able to recoup that cost when you sell the property? Again, these are important considerations that can impact your profitability. Once youve found a property that you think is a good investment, its time to move on to the next step.
Map Out Your Investment Window
Many people buy stocks with the goal of holding them for many years so they can gain value. You may want to take a similar approaching to real estate investing — or maybe not. The choice is yours, but it’s important to know what investment window you’re dealing with.
If you’re looking at real estate as more of a short-term investment, then house-flipping is an option worth considering, as it could allow you to turn a decent profit quickly. If you’re taking a longer-term approach, buying income properties that appreciate in value is something you may want to look at, and the same holds true for buying REITs.
Where Do You Start
Real estate can be quite a bit more complicated than simply putting a few hundred dollars into a stock you’re excited about. While it’s relatively easy to invest via REITs and crowdfunding platforms, buying actual properties or land can take weeks and even months of research.
Start by educating yourself about the process using real estate investing resources like BiggerPockets and Roofstock. You can learn a lot on these websites about how to develop an investment strategy, how to account for taxes, how to calculate the return on investment on a property and more.
If you plan to purchase properties, you’ll also want to enlist the help of a real estate agent who can help you find the types of properties you’re looking for in or outside your area. You may also consider joining forums and groups on social media that are dedicated to real estate investing, so you can ask questions as you learn and start making your first investments. Also check with your bank to determine whether you’re likely to qualify for a mortgage for your investment .
Learning about real estate investing can be a steep learning curve, but over time, the efforts can pay off.
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Defining Your Real Estate Portfolio
Seasoned investors know that it is best not to put all your eggs in the same basket. The same goes for real estate investments. When gearing up toward starting a real estate investment portfolio, it is best to establish your long- and short-term goals to protect yourself and select a strategy from the get-go.
How To Determine A Good Rental Property
There are many criteria youll need to consider in your search for a good rental property in which to invest. If youre looking for a residential rental property such as a single-family residence or a small apartment complex you may want to focus your search within neighborhoods with homes appreciating in value, low crime rates, strong employment figures and well-rated schools.
But assuming you have narrowed your search for rental investments to a given area or even to a few specific properties, you should then run some basic calculations to get a better sense of how well those properties might be able to generate income for you.
Your goal, of course, will most likely be to find a rental property that generates positive cash-flow where the rents and any other income you earn on the property is greater than all expenses, including your mortgage payment, property management fee, property taxes , repairs, insurance, etc.
Imagine you were to purchase a four-unit apartment complex for $300,000, and you took on a $1,900 mortgage payment . You then hired a property management company for $150 to handle screening tenants and managing repair and maintenance issues. Further assume that ongoing maintenance work like landscaping for the apartment runs you another $200 and that for expenses you are responsible for on the property, such as some of the utilities and property insurance, cost an additional $500. Your total costs, then, come to $2,750 per month.
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How Much Money Do You Need To Invest In Real Estate
Thomas J Catalano is a CFP and Registered Investment Adviser with the state of South Carolina, where he launched his own financial advisory firm in 2018. Thomas’ experience gives him expertise in a variety of areas including investments, retirement, insurance, and financial planning.
There are many reasons to invest in real estate from rental income to portfolio diversification. During times of volatility in the stock and bond markets, some investors turn to hard assets such as real estate. In the past decade, investing in second homes to use for short-term rentals listed on home-sharing platforms has grown in popularity. There are several ways to get a start in real estate investing without an enormous outlay of cash.
Investing With Commercial Properties
Commercial property investments usually purchase more prominent and established office buildings, malls, warehouses, etc. The lease is generally locked away for many years with long-term tenants. When learning how to start property investing, remember that commercial real estate investments can lead to cash flow opportunities but are subject to market fluctuations. However, it is hard to begin with, commercial and industrial real estate when beginning real estate investing.
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See If It Pays To Partner Up
If you’re going to invest in physical properties, it could help to have a fellow investor to team up with. Not only can you and a partner pool resources to procure more properties, but you’ll also have someone to split the work with.
Say you decide to purchase an income property and you don’t want to outsource its upkeep or rent collection to a property manager. If you get a partner to invest with, you’ll have someone to split the maintenance and administrative work with.
Join Real Estate Investment Groups
Real Estate Investment Groups are sort of like small mutual funds for rental properties.
- A company will buy or build some apartments and then allow investors to buy them through the company.
- As a single investor, you can own one or multiple units.
- The company operating the investment group collectively manages all the units. It takes care of maintenance and operations in exchange for a percentage of the monthly rent.
This is passive in that investors don’t worry about placing tenants or managing their units. But you must do your due diligence before investing. This includes verifying all fees, services, and tenant screening processes, as well as the integrity and experience of the group’s managers.
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Become A Real Estate Agent
To begin learning and earning money, you could start a side business or full-time career as a real estate agent. While technically not investing, its a great way to learn about real estate transactions and the overall real estate market.
Every state is a little different, but you typically have to take a certain number of classes up front . Then you take a comprehensive test and pay your licensing dues with the state.
Additionally, youll typically need to find a brokers office to hang your license with. There are many different types of firms and different business models, so youll have to find one youre comfortable with.
And finally, most agents also join their local Association of Realtors and pay for access to the Multiple Listing Service.
The initial investment could cost between $1,000 $2,000. But youll need to invest additional time and energy into lead generation marketing in order to start making some money.
If you want to pursue this career, I recommend starting with the book Millionaire Real Estate Agent by Keller Williams founder Gary Keller.
You can also check out this YouTube playlist from Graham Stephan, who is a successful agent and investor in Los Angeles, California.
Decide How Much Money You Need
Every strategy of real estate investing has its own starting price point. Wholesaling and crowdfunding require almost no upfront capital while flipping in some popular markets might require 100% cash transactions.
Real estate investor Dustin Heiner says the amazing thing about investing in rental properties is that you dont need a lot of money to get started, but you do need some. For buy-and-hold properties, he recommends $10,000 to $15,000 minimum.
There are ways to invest with no money down, but those are ridiculously hard, and I suggest staying away from those, Heiner said. By starting with $15,000, you can have enough for a down payment on a $60,000 house that rents for $850 a month. After all your expenses, you can pocket $300 or more in passive income from this one property.
Real estate prices are location-dependent. You may want to save more or less than $15,000 depending on the type of investing you choose and the prices of properties in your area.
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Why People Invest In Real Estate
There are three main reasons Canadians invest in real estate.
Low bar to entry. Real estate investing is so popular primarily because it requires such little knowledge. Almost anyone can figure out how to buy and sell a property and rent it out. There are even firms specializing in managing investment properties, which takes away a large portion of the headache. In contrast, investing in the stock market tends to intimidate people. .
The power of leverage. Banks are willing to lend out piles of money for real estate at near-historic low interest rates. Mortgage debt reached nearly $1.44 trillion in 2018, almost eclipsing our GDP. But mortgages, a burden on principal residences, are a boon for income properties. Leverage is an extremely useful, albeit risky, tool in investing. Gains are magnified, and so are losses. They allow investors to use very little of their own cash while getting someone else to pay their debt and build their equity. You can use leverage in any kind of investment, but the banks will lend much smaller amounts at higher rates. This factor alone makes real investing attractive.
Tax benefits. Nothing eats away at returns like taxes. And like most businesses, real estate investing has several tax advantages. Investors can deduct mortgage interest, just like any other sort of investment loan . Investors can also defer income taxes by claiming property depreciation, not to mention write off any expenses for maintaining and running the property.
How Can A Realtymogulcom Reit Help Me Get Started In Investing
If the thought of searching for the right rental property, trying to calculate your return on investment, and dealing with tenants leaky faucets sounds like more than youre willing to take on but youre still interesting in investing in real estate one alternative might be to invest in MogulREIT II, which exclusively invests in multifamily apartment buildings.
With an investment in MogulREIT II through RealtyMogul, you can enjoy many potential benefits including the chance to realize a long-term return through appreciation of the properties included in the portfolio, and the chance to enjoy ongoing income typically paid out quarterly.
Additionally, because a MogulREIT II is a truly passive investment real estate and property management professionals find and then manage the day-to-day operations on these deals such an investment gives you the potential to enjoy both the short- and long-term returns of investing in a rental property without having to do any of the work.
Of course, as an investor you should carefully consider the risk factors involved in MogulREIT II before purchasing shares. Risk factors include the overall risks of the real estate market as well as the minimal operating history of the REIT and the ability of the REIT to implement its investment strategy. For a more complete set of risk factors please review the Offering Circular.
You can learn more about investing in MogulREIT II here.
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Strategies For Wealth Stage #3 Saver
Strategy Goal: Dramatically increase your savings rate by reducing expenses and/or increasing income
- Any of the options in stage #1
- Hack your housing in order to reduce or eliminate your housing payment
- Do a Live-In Flip in order to build big, tax-free savings
- Do a Live-In-Then-Rent by living in an affordable house for 1-2 years and then keeping it as a rental
- Start wholesaling real estate for quicker, smaller chunks of cash
- Start a non-real estate side-hustle that matches your skills and passions with a need in the marketplace
Closing Thoughts On How To Start Investing In Real Estate
As you can see, many moving parts go into figuring out whether investing in real estate is the right next step for you.
Investing in real estate doesnt necessarily mean you need to buy a house and start renting it out.
There are many creative ways to invest in real estate and still make money:
|How to Invest in Real Estate||Platform to Use|
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Are You Cut Out To Be A Landlord
Are you good at repairing drywall? Know your way around a toolbox? Unclogging toilets smell good to you? Yes, you can call a stranger to do it for you. Or, you can call your trustworthy professional property management company.
Tip: If youre not the handy person type and dont have lots of time and spare cash being a landlord may not fit you. Hire a professional property management company.
WeLease Property Management trained staff and reliable contractors take care of all types of rental properties in San Diego County. We got your back!
For example, our posts include money-saving ideas and tips for landlords like:
Read About Real Estate For Beginners
If you truly want to start a real estate business, it is crucial to learn as much about the industry as you can. There are countless investing books, blogs, and magazines that are a great place to start. While there are a ton of options out there, try not to overwhelm yourself at first. Instead, try grabbing a few investing books or subscribing to a real estate newsletter and designate just 15 minutes a day to reading something new. One thing all successful real estate investors have in common is that they never stop learning. This continual education mindset will serve you well throughout your career as an investor. Check out this list of real estate investing books for a few recommendations to get you started.
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Your Next Steps To Investing In Real Estate
You need to see real estate investing as a business venture. And that means being businesslike.
So begin by investing your time in research. Use the links we provided above and then keep reading. You need to know all about your chosen way of making money from property most importantly, the potential pitfalls.
Once you understand the business model youll be pursuing, see whether it fits within the property market in your chosen area.
- How quickly, if at all, are home prices rising?
- What about rents?
- How easy is it to find new tenants?
You can find much of that data online and good sources include Realtor.com and Apartments.com. But dont stop there.
Cultivate contacts with real estate agents and contractors in your area. Most are willing to share their expertise with newbies, especially if they sense you might bring them future business. And other landlords can also tell you about how theyre finding local market conditions.
Create A Plan To Find Deals
Good deals dont just land in your lap. Finding good deals is more like a treasure hunt. You have to turn over dozens and dozens of stones before you find a hidden gem.
Periods like 2008 2011 during the Great Recession are the exception to this rule. The treasure hunt for real estate deals was much easier then. Warren Buffett in his 2016 letter to Berkshire Hathaway shareholders described this period nicely:
Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, its imperative that we rush outdoors carrying washtubs, not teaspoons.
We should always have our washtubs ready for periods when it rains gold. But what about the rest of the time? During normal economic times, you have to work hard and create a plan to bring good deals to you. And you have to stay disciplined with your investment criteria so that you dont succumb to the fever of a hot market.
You can learn the 17 methods I used to buy 33 deals in one year inside my popular course Real Estate Deal Finder (and get 30% off by using the coupon code THIRTYOFF-DF-REI101 at checkout.
My recommended plan to find real estate deals includes two sub-steps:
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