To many, the mere thought of making a major investment scares them off. But there’s nothing to be afraid of when investing in real estate, as long as you follow these four helpful tips for first-timers.
We’ve laid out the welcome mat, popped those chocolate chip cookies in the oven, and are ready to give you a quick tour of real estate investment best practices.
#1 Invest in the Right Neighborhood
Your real estate investment is only as good as the neighborhood it’s in. If no one wants to stay there, you won’t have much cash flow coming your way. Alternatively, if the neighborhood is too pricey and the purchase price is astronomical, you’ll struggle to make back what you spent.
Strike the perfect balance by investing in an up-and-coming neighborhood.
Work backwards by researching the different rental prices in various emerging neighborhoods to determine how you’ll fare on the block:
- Speak with a professional realtor to seek their expertise about certain areas. If you forge a solid relationship, consider hiring them to find potential tenants for your property.
- Scour through Airbnb listings to get a gauge of the average pricing for either long- or short-term visitors in the neighborhoods you’re considering. Airbnb is an easy way to put your rental property in front of the right people, although the constant turnaround of short-term rentals may be more of a hassle than renting to long-term tenants.
- Search on Craigslist and Facebook Marketplace for similar listings. For example, if you’re buying in Houston, search for similar rentals in the city (and surrounding neighborhoods) to get a realistic idea of what you can charge. However, beware of advertising your property this way, as you may encounter scams or people with less-than-legitimate intentions.
#2 Start Small
A modest home will give you the chance to learn the basics before you potentially upgrade to bigger, more expensive properties. Like any new skill, sound real estate investment has a steep learning curve—trust us, it’s a long way to fall when you have real money on the line.
There’s no shame in starting small, especially when it means you aren’t risking such a large investment before you’ve gotten a handle on the tricks of the trade.
#3 Secure Capital
You’ve narrowed down your options and found the perfect investment property in a reasonable but promising neighborhood.
Now comes the tricky part: financing your purchase.
The world of loans, down payments, mortgage insurance, and the like can be extremely tricky, and that’s before you factor in the added hurdles for first-time buyers and non-owner occupied rentals—meaning people like you (twice over!).
Luckily, you can bypass a lot of the slow-going, bureaucratic borrowing processes by securing one of the hard money loans Dallas, TX has to offer. These differ from traditional home loans in a few key ways (all of which benefit you as you navigate investing for the first time):
- They take a fraction of the time because of the limited application and approval process. Get approved within 24 hours and find money in the bank in seven to ten days. Now, you won’t miss out on the perfect rental property because your loan is stuck in the processing stage for weeks (or even months).
- They have no minimum credit requirements, which can be an incredible asset to first-time investors who haven’t necessarily built up a long credit history just yet.
- They can be used towards non-owner-occupied properties, including residential and commercial buildings. This is not the case for many traditional lenders, which typically make financing your investment an uphill battle.
#4 Implement Property Management Systems
Owning your investment property is one thing, and advertising it through real estate agents, Airbnb, and Craigslist is another. But how the heck do you actually deal with being a landlord and property manager?
Put effective, long-term systems in place early and re-evaluate often.
Here are just a few to think about right off the bat:
- Housekeeping – For short-term rentals, you’ll need to clean the property between stays. Well, not you, per se, but someone you hire, schedule, and manage.
- Tenant screening – If you’ll be seeking out long-term tenants, create application and interview protocol that is fair and equitable to avoid any potentially discriminatory screening practices.
- Maintenance – As the landlord, you’ll need to have someone on call for any broken door handles, malfunctioning AC units, and leaky pipes. Get on top of your handyman needs before an emergency situation arises. When doing so, keep location in mind. For example, you’ll want to search for a handyman in Atlanta (or whatever city you’re in) by area code, so they’ll be easy to call in for quick fixes and big projects alike.
You don’t have to take care of everything on your own. Invest in property management software that makes your real estate investment even more fruitful.
Invest in Your Future
Investing in real estate can be an incredibly lucrative financial decision because of the consistent, passive income that accompanies owning a rental property. With these helpful tips, we’ve made it even easier to make money.