Buying or selling a home can be very daunting and stressful to the average person, so the idea of investing in real estate may seem like a pipe dream. However, it is a great way to diversify your investment portfolio and build generational wealth. There are many ways to approach investing, whether buying stock in an REIT company or making that investment for yourself. And just like investing in the stock market, beginning now is better than waiting for the perfect circumstances. In fact, waiting can allow opportunities to just pass on by and watching prices skyrocket or interest rates increasing.
There are many strategies for investing in real estate. The most common is to buy a property that needs renovations, which then the cost of completing those renovations must be considered before making any kind of offer. That would include whether you intend to renovate yourself or hire that out, the cost of materials and tools, and of course checking with the county office to make sure these renovations are allowed. Not all associations are public, and not all deed restrictions are known, so having a great Title partner can save you some headaches in that department. Once repairs are made, it is a matter of deciding to refinance for a lower interest rate and renting the property or selling the property and using the proceeds towards another investment project.
House hacking has been another popular strategy. That would be renting a part of the property, such as guest quarters or even just a room, while living in the home. Living in the investment property also has many benefits when it comes to renting or even selling the property. You can discuss the benefits of living in an investment property with your tax professional to find out about the deductions that can be made. Always check with the local HOA and deed restrictions to make sure renting is not restricted.
REIT (Real Estate Investment Trust) is a great way to dip you toes into the real estate game. The company owns, operates, or finances income-producing real estate such as apartments, malls, and data centers. They pool capital from investors to purchase portfolios, which allows investing individuals to earn dividends without managing properties directly.
Multi-family properties are great investment opportunities. Up to four units is still considered residential, so more affordable loan programs can still be used towards these properties. Consider speaking with a lender to discuss options and programs available.
Analysis paralysis is the biggest threat to getting started. Building a "Buy Box" can help you overcome the paralysis. What goes into a "Buy Box"? What neighborhoods are you looking at? What are the occupancy rates (rentals)? What is the average rent per square foot? What is your budget? Those questions help guide you throughout your real estate journey. Do you want consistent cash flow? Or are you looking for cash-on-cash returns?
Having a trusted Realtor® on your side is crucial. Whether you are looking for the next project or looking to get it sold, having a Realtor® will ensure that you are utilizing all databases and networking with professionals in the industry. Operating under a strict code of ethics and professional guidelines, you can be sure your Realtor® will provide fiduciary duties to you through your real estate journey.
Check out the Bigger Pockets website for more information on investing in real estate. They also have a few different podcasts to learn more about investing in real estate.