WPO Image

5 Tips for Beginners in Real Estate Investing

There are so many options available, so it’s vital to take your time, compare prices, and keep analyzing if this would be a good investment or maybe consult a real estate agent  because having a professional with you will greatly increase the chances of making the right decision while getting a property that will be a truly profitable investment, specially if you are a beginner. 

Investing in real estate is still a stable and safe way to grow your money, but before deciding, you need to analyze the advantages and disadvantages. This is a very important decision for every investor, so the property you choose should match your circumstances, investment goals, and budget.

Here are five important tips you should know if you are considering to invest in real estate.

5 tips to consider before making a decision

  • Take into account the location of the property. Is it a safe zone? Is it close to key places? Are there good schools nearby? You always have to make sure that the property you invest in attracts good and reliable tenants, in other words, that it will generate rental returns for you.
  • Make sure that the property you are planning to invest is adapted to the level of investment you want to make, both in money and in time. Anything that needs renovation will cost more before it starts generating returns.
  • Don’t be tempted to go for something too expensive – high-end properties will cost more to maintain over time. The “sweet spot,” especially for beginners, is probably a relatively low-cost house in an up-and-coming neighborhood.
  • Once you’ve invested in the property, be sure to quickly find good tenants, so you can start earning rental returns. No one needs empty rental properties in their portfolio!
  1. Don’t pay too much

You must be realistic and keep your ideas clear when investing in real estate. Do not rush and overpay for a house. Similarly, you should do your research and make sure you are looking in good areas or up-and-coming places where prices and rents are heading in the right direction.

Most of us don’t have a detailed picture of values ​​and trends outside of our home area, and this is where, in the United States, for example, websites like https://www.zillow.com/home-values/ help a lot. This popular website gives you more information on prices and trends, state by state, to help you make the right decision.

  1. Find the right financing

Before you even start looking at investment properties, you need to consider how you will finance your purchase. Most investors need to obtain a mortgage and depending on the country or the place where the property in which you want to invest is located, real estate credit may be scarce, which makes it relatively very expensive, or it may be directly null, in which case you must make a significant outlay of capital to acquire the investment property. Or, it could happen that there is enough real estate credit in a certain place, but the conditions are not the best for foreign investors, making it relatively more expensive, considerably affecting the potential yield, or turning it directly into an unprofitable investment.

Another way would be to use a conventional loan to finance your investment property. To secure this type of loan, you will need a good credit history and score to be approved, and this will also determine the interest rate on your mortgage. You will also need to make a down payment of between 20% and 30% of the purchase price of the property.

Another alternative would be to leverage the equity in your own home. This involves getting a home equity loan or a cash-out refinance. Typically, it’s possible to borrow up to 80% of your home’s equity value to use toward your purchase. With a HELOC you make interest-only payments, but these are variable, so they can increase if the interest rate changes. The cash-out route has a fixed interest rate, but you can extend the length of your existing mortgage, which means you’ll end up paying more in interest; you would need to offset this possible additional expense against the expected returns on your second property.

In short, when it comes to financing your real estate investment, you will certainly have many options, each one with pros and cons.

  1. Explore ways to buy

The two ways to buy your first investment property are through an agent or at an auction. If you choose a real estate agent, he/she can help you with the purchase and the paperwork of the property, but keep in mind that you would have to pay commissions that could reach XX% of the purchase price. On the other side, buying through a property auction may not be the best option if you do not have experience, since it can be more expensive in the end in terms of remodeling it and other bureaucratic / legal issues. These properties are normally cheaper but will most likely require more work.

  1. Consider crowdfunding

There is another way to finance your real estate investment, beyond the traditional ways of financing. Crowdfunding is the practice of crowdsourcing money, in which multiple investors join forces and pool their assets, giving them much greater purchasing power collectively. In the past, real estate investments were mostly done through institutional investors and high net worth individuals with millions to invest. Real estate crowdfunding allows a group to finance the purchase of a property and each individual has a percentage of participation, depending on the size of their contribution.

Through a good real estate agency, you can benefit from the crowdfunded purchase of great properties. They will take care of the due diligence and legal administration, while you relax and enjoy the benefits of reliable rental income. Better yet, there’s a good chance that equity interest will accrue, which is transferred to you once the property is sold.

So, if you think it’s time to invest in a property, please take into account the tips in this article and we recommend you to work with a good real estate agent.

U Can Blog