There’s no hiding the fact that real estate investing can be incredibly lucrative. But like any other business venture, there are no guarantees. If you’re looking to get into the world of real estate investing, it’s important to arm yourself with as much information as possible so that you can make informed decisions and increase your chances for success.
At MY SMART COUSIN, we help aspiring homeowners and investors, with a particular focus on Black and Brown folks and women, make their Real Estate investment journey a success. As experienced and successful Real Estate Investors and Coaches, we help you determine your strategy and implement a custom-designed business and financing roadmap. And if your focus is on the lower end of the market, we help you buy a house for the price of a car, our personal favorite way to buy real estate!
In this blog post, we’ll discuss some of the basics of real estate investing, and highlight key factors to keep in mind if you’re just starting out. Let’s dive in!
THE BASICS OF REAL ESTATE INVESTING- WHAT YOU NEED TO KNOW
Real estate investing is a great way to make money and build long-term wealth. However, it’s not a get-rich-quick scheme. There can be pitfalls aplenty, and patience, expertise, and persistence are required to be successful. The basics of investing in real estate are as follows:
· First, you need to find good properties that have the potential to appreciate in value. If the properties will be rental properties, they also must provide steady rental income. A good rule of thumb for rental properties is to buy the property for no more than 100 times the monthly rent. Is it a single-family house renting for $1,000 a month? Add two zeros to the end, taking you to $100,000, which should be your maximum purchase price. Are you looking at multifamily that generates $5,000 a month in rental income? Adding two zeros means you should pay no more than $500,000. The two-zero rule, of course, has many exceptions, but it gives you a quick snapshot of the property’s price relative to its income potential.
· Once you’ve found a good property, you need to finance it. You can do this by taking out a loan from a third party such as a hard-money lender or private individual, obtaining seller financing, bringing in others as equity partners or investors, or using your own savings. If you’re using a loan, you’ll need to make sure that the interest rate, any fees, and other terms still make the deal profitable and affordable for you. If you’re involving partners or equity investors, you’ll need to ensure that your investment strategy and goals for the property are aligned, and roles are clearly defined. You will almost certainly want to engage the services of a lawyer for partnership and equity investment deals.
· After you’ve purchased the property, you’ll need to manage it properly in order to maximize its value. Property management can either be handled by you, or by a third-party professional manager who is paid a fee. In either case, property management boils down to making sure that the property is well-maintained, good tenants are identified and in place, customer service is a priority, maintenance is timely, and rent is collected on time.
Real estate investing is not for everyone, but it can be a great way to build long-term wealth. If you’re willing to put in the work, it can be a very profitable endeavor.
HOW TO FIND THE BEST PROPERTIES AND MAKE THE RIGHT OFFERS
You’ve finally decided you’re ready to take the plunge and buy an investment property. But where do you start? And how do you make sure you’re getting a good deal? Here are a few tips to help you find the best properties and make the right offers.
· First, do your homework. Research the market and talk to experts to get a feel for what kind of property is likely to appreciate in value, and how to assess the rental rate for a unit. Explore MeetUp and Facebook groups as a first step in learning from others.
· Next, once you’ve found a few properties that meet your criteria, it’s time to start making offers. It’s important to be realistic with your offers, based on the current market value of the property and its potential for growth. Don’t be afraid to negotiate hard – but also be prepared to walk away if the seller isn’t willing to meet your terms.
WHAT KIND OF RENOVATIONS WILL GIVE YOU THE BIGGEST RETURN ON INVESTMENT
When it comes to renovations, there are a lot of factors to consider. How much will the project cost? How much value will it add to your property? And how long will it take to recoup your investment? If you’re planning a renovation and hoping to get the biggest return on your investment, here are a few projects to consider:
· Updating the kitchen is always a good bet. A well-designed kitchen can add significant value to your investment property, and it’s something that potential buyers and renters alike will definitely notice.
· Adding an extra bathroom, even a half bath, is another great way to increase your property’s value. Particularly if you’re flipping the property, an extra bathroom can be a real selling point.
· Finishing your basement is another great option. A finished basement can be used as extra living space or even rented out for additional income.
Whatever renovation you decide to undertake, make sure you do your research and plan carefully. With a little forethought, you can make sure your renovation adds both value and curb appeal to your home.
HOW TO MANAGE YOUR PROPERTY PORTFOLIO FOR MAXIMUM PROFITABILITY
As a property investor, you know that there’s more to success than simply acquiring as many rental properties as possible. To really maximize your profitability, you need to carefully manage your property portfolio. Here are a few tips for doing just that:
· First, set clear goals for your property portfolio. What are your financial objectives? How many properties do you need to reach those goals? Once you have a good understanding of your goals, you can start developing a strategy for acquiring and managing rental properties.
· Second, diversify your portfolio. Don’t put all your eggs in one basket by investing only in one type of property or in one geographic location. By diversifying, you’ll spread the risk and improve your chances of achieving your financial goals.
· Third, stay up to date on market conditions. Keep an eye on local trends so you can make adjustments to your investment strategy as needed. For example, if you notice that rents are rising in your area, you may want to consider buying additional rental properties to take advantage of the trend.
THE BOTTOM LINE
If you’re looking to get into real estate investing, it’s important to know the basics. We’ve outlined the key points you need to know to make your investments successful. Do you have any questions about getting started in real estate? Let us know – we’re happy to help!
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