If you’re curious about investing in real estate and want to become a real estate investor, the first step you need to take is to begin thinking like an investor, which starts with your personal finances. You have to hold every dollar accountable now, because that’s exactly what you have to do as an investor. If you develop that discipline now, it makes those habits so much easier.
Next, have a written budget of all the money that’s coming in and all of the money that’s going out. Of the money you have left, you always want to make sure you have two to three months’ salary in your savings first before you even start thinking about investing, in our opinion.
The next step is to speak to a lender. The rule of thumb is that you should put down 20% to 25% on your down payment so you can minimize that mortgage payment by eliminating PMI and increase your monthly cash flow. You’ll also want a credit score of at least 740, preferably, so you can get the best interest rate possible. The lender will help you gather all of your financial documents, such as your bank statements and tax returns.
Once your finances are in order, it’s time to decide on an investment strategy. There are so many different ways to go about it depending on what your goals are. You can go the fix-and-flip route, where you buy low, renovate, and sell to make a quick profit. You can also look at the long-term strategy of buying and holding a property, where you rent out the property, have the tenants cover the monthly mortgage payment, and ride the market for appreciation.
Now it’s time to decide what kind of property in which you want to invest in. It could be a single-family home, duplex, or four-plex. Any property with more than four units does turn into a commercial investment property, which calls for a different kind of financing.
The best thing to do at this point is to focus on the investment strategy that you chose and try to master it to the best of your ability.
When it comes to investing, the numbers are really what matter at the end of the day. Educating yourself with the numbers in the market is very important. You want to know things about maintenance costs, vacancy rates, repair costs, and more.
Finally, it’s time to find the property. The rule of thumb is that you want to buy a property for at least 10% below its market value, and negotiate terms to best serve the investment strategy you chose. Stay patient, look for a gem, and don’t sway from your goals.
When you’re ready to get started on the path of becoming a real estate investor, give us a call or send us an email. We’d love to help you map out a strategy that will help you and your family succeed.
If you have any questions for us, don’t hesitate to reach out. We would love to hear from you.