As with anything, setting out to begin investing in real estate comes with a bit of a learning curve — familiarizing yourself with the ins and outs, details, and intricacies of this type of investment. Real estate investing gets particularly tricky when it comes to the financial and legal matters you are legally required to exercise due diligence on.
While receiving formal training of sorts would be ideal, there are some tricks and methods to help you set off on your own. Here are some real estate investment tips to get you started:
1. Go Wholesale
Real estate wholesaling is the process of buying a property, making an agreement with the seller, and assigning the purchasing contract to another end buyer. You would usually only want to wholesale a property sold at a significantly lower price than market value and that won’t cost you too much to renovate or spruce up. Properties to look out for are those sold during the off-season, in a rush sale, or by a generally less knowledgeable seller.
Wholesaling is a great way to start in the real estate business because it takes a relatively smaller capital to pull off yet teaches you enough about making a sale to carry on, including foundational knowledge about the real estate market and the negotiation skills vital to succeeding in this business.
2. Location Is Key
Location being vital to a property is one of the most basic things you learn about real estate. Where a property is located has a fairly large say on its value, which you will also have to adjust according to the prices of other listings in the area. But the concept of location doesn’t just end with price determination, it’s taken a step further with a little trick called the “fix and flip.”
Fix and flipping involves buying “the worst house in the best street.” That means taking a property of a relatively lower value in a coveted location, sprucing it up, and selling it at a much greater price. This works because you can never go wrong with location, giving you the opportunity to build equity with the property you choose.
3. Remember Two Numbers: 20% and 1%
When you’re looking to buying a property to sell later, you naturally want to earn significant money off the sale. This involves looking at both ends — the buying price and the selling price.
For the former, follow the adage “the money is made at the buy.” Buying a property at no less than 20% below market prices ensures that you have “instant equity” and allows you to adjust to things like market correction and other economic factors that could potentially impact your selling price. For the latter, if you intend to earn from a property by leasing it out to tenants, make sure that it earns you at least 1% of its buying price every month.
Investing in real estate presents vibrant opportunities to anyone with the means and cunning to navigate the industry’s complexities. Once you get the hang of it, you’ll have for yourself a terrific means of generating consistent income for years to come.
To learn more about real estate investing, partner with Blue Hen Homebuyers. Call our offices today at 910-802-2222 to discuss how we can help.