Real estate investing is gaining popularity, and if you’ve been giving it some thought, this guide will give you an overview. The goal of any real estate investor is typically to make money. This means purchasing an investment property at a good price so you can rent it out and maybe eventually sell it for a profit.
Real estate investing is an ever-changing game. To get and stay ahead and make consistent money, you’ll need to do your homework. Here are 10 things to know:
1. Get Pre-Approved for a Mortgage
When you get a mortgage pre-approval first, there are some benefits you can take advantage of, financial benefits being a big one.
Once you’re pre-approved, most lenders will lock in an interest rate for you, so if rates go up while you’re conducting your property search, you’ll enjoy your lower, locked-in rate.
2. Cash Flow
Cash could be the defining feature of any investment property. If you’re projecting strong cash flow, you should be all set, but if your projection is negative, you might need to reallocate money from other areas such as:
- Your salary
- Other investments
3. Keep Up With Local Pricing Trends
4. Research the Local School Ratings
Areas with quality schools are attractive to parents with school-aged children.
Most states rank their schools based on how well the kids in each school district score on common tests like English and math.
5. Future Development
Before you land on an area for your investment property, talk to people living in the neighborhoods you’re considering, as well as the local town hall to get information on planned and potential future development.
- Take a drive around town and see what kinds of construction are already underway.
- Even if the location you’re considering doesn’t have many amenities like banks and restaurants at the moment, it might in just a few years.
- Keep an eye out for new roads to accommodate future growth, hospitals, and shopping malls.
- If a prospective area is set to expand in a few years, you might be able to secure a property at a low price and be able to take advantage of higher rent and substantial appreciation in the future. On the other hand, look out for areas that are always congested with heavy traffic or have overfilled schools.
6. Tax Savings With Alternatives
If you’re comparing two nearby towns, and one has lower property taxes, you might be able to take advantage of significant savings.
Also, find out if tax rates are expected to move up or down in the coming months.
7. Suburban Areas
9. Know What You Need
10. Start Small And Learn.
If you’re new to real estate investing, start small.
As you get used to everything that comes with being an investor, you’ll want a smaller and easy-to-manage property.
When you get some experience under your belt and have earned enough money, you can expand your business by replacing your property with a bigger and more expensive one, or purchasing a second one.
Armed with these tips, you can start the exciting journey down the road of real estate investing!