5 Tips For Investing In Real Estate

Investing in real estate is becoming very popular with today’s investors. Real estate is one of the things you can buy that appreciates in value over time.

For example, buying a Del Mar home today for $750,000, could be worth over $1,000,000 in 10 years. That’s an extra $25,000 per year for not doing much of anything.

However, real estate investments are much more complicated than regular stock and bond investments. It can seem daunting at first if you are just starting, but here are some helpful tips that will help you out.

1) Check your credit
Before you start investing, it’s crucial that you check your credit in order to make sure you’re in good standing. This is an absolute must before you finance any new properties. Most lenders require borrowers to have a 700 or better FICO score. Also, make sure that you do not have lots of debt from car loans, or credit cards, that you haven’t paid off yet. It’s important to keep your debt-to-monthly-income ratio low in order to invest successfully.

2) Create a plan
In order to get off to a smooth start, creating a good business plan is extremely important. Start by setting realistic goals with timeframes of one, three, five, and ten years. Think about how much time each goal will take, and how much it will cost. Also, think about who will be involved in this investment, and how you will gain their trust and cooperation. Make sure to also consider the potential risks and costs that could slow down your progress, and how you will handle them.

3) Find a good real estate agent
While starting to look for properties it’s important that you find a realtor that knows what they are doing. A good realtor is essential to your real estate investing process. Make sure that the realtor you choose has lots of experience with foreclosures, as well as having sold a lot of investment properties. It’s also important to look for a realtor who understands, and has experience with concepts like ROI (return on investment), debt service, and NOI (net operating income.)

 

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4) Look for the best areas to invest in
Something important to keep in mind while looking for property is that, you can always change the house, but you can’t change the location. This is possibly the most important aspect of real estate. Location, location, location. What’s special about it? Is it the view? A great neighborhood? An easy way to get to know the neighborhood you’re looking in, is to just ask around. Ask people in town and local real estate agents. Also make sure to check Zillow and Craigslist for extra insight on how much homes in this area usually sell/rent for.

5) Make sure you have extra cash saved
It’s always good to have extra cash laying around in case of emergencies, but this is especially important when investing in real estate. Create a reserve fund where you can save money just in case the dishwasher breaks, the roof leaks, or you have an unexpected termite infestation. You need to take into consideration that the unexpected does happen, and you need to be prepared for whatever happens in order to successfully invest in real estate.

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