In this post, we list some tips on how to become a real estate investor from people who have had real estate success.
Real estate has been a tried and true money making opportunity for investors large and small for about as long as anyone can remember.
Despite being such a popular investment, there is no guarantee you will make money on real estate.
As we’ve seen in the past ten years, many people have lost money on real estate. Without the right investor savvy and location, your real estate could easily lose you money.
If you’re thinking of investing in real estate, even if it’s just a single rental property, we have real estate investment tips for you below.
A lot has changed in the real estate market over the past ten years, with prices rising, crashing and recovering in a relatively short span.
According to Clear Capital, median home prices have risen by 53 percent nationwide since the bottom of the housing market crash in 2012.
Does that mean it’s too late to make money in real estate? Not if you find the right property at the right price and manage your investment well.
Home prices in Illinois have not risen as quickly as in other places, which means there could still be surplus value in many properties.
Here are some key strategies:
Location, location, location
You’ve heard this expression before and with good reason. The right location could be all the difference between a positive or negative investment.
Look for properties in neighborhoods that are economically stable. In this type of neighborhood, you can realistically expect long-term price appreciation.
It will also provide a large, consistent pool of prospective tenants. These are usually the best entry level properties for a new real estate investor to get into the market at.
Determine the cash flow
Before you purchase, run the numbers you can realistically expect on your new property.
This will include your tenant rent minus all your expenses. Don’t forget to include management fees if you won’t be hands-on, as well as a reserve fund for periods when it may be vacant.
If you’re not interested in short term cash flow, you could work towards a goal of breaking even each month until the property appreciates in value and you can cash in on the sale.
You can use this Rental Property Calculator to determine a property’s potential.
If you won’t be able to manage the property, either because of skills, time, or location, you will need to hire a property management company.
Expect to pay a monthly fee of about 8 percent to 12 percent of the rent you receive, plus a leasing fee, which may cost from one-half to a full month’s rent.
Don’t invest your own money
In the ideal purchase, you will put down as little of your own money as possible.
Instead of using all of your own money, you will borrow the needed amount above your down payment and charge enough in rent to pay your loan.
You will end up paying more for a mortgage on an investment property than you would for your own home.
The requirements to get a mortgage on a rental property purchase will vary depending on whether you intend to live in the rental property and who is backing your mortgage.
If you have enough equity in your current home, you can take out a home-equity line of credit against it to buy your investment property.
Despite ads that proclaim investing in real estate is a guaranteed path to financial success, developing a real estate investment will require careful thought, skill, and effort on your part.
Investing: How to become a real estate investor – Chicago Tribune
10 Habits of Successful Real Estate Investors – Investopedia
3 Steps to Get Started As a Real Estate Investor – Investor Junkie
How to Invest in Real Estate Without the Headaches – Kipplinger
Glossary of Commercial Real Estate Terminology
If you require a real estate attorney in DuPage, Kane, Will, Kendall, or Cook County to represent you with any issues related to real estate, the Law Offices of Lora Matthews Fausett, P.C. are well trained to handle matters relating to buying and selling, short sales, commercial leases, as well as foreclosure defense and many others.
For Information Call 630-858-0090
* Advertising Material: To the extent that the information in this post is interpreted as attorney advertising in accordance with the Illinois Rules of Professional Conduct or within the meaning of state bar rules from all other localities, this statement is made pursuant to those rules.
Specialties: Specialization claims are prohibited by Illinois Supreme Court Rules and we do not claim to be specialists. The content of this e-mail is organized and presented for the sole purpose of general information. None of the included content should be construed as legal advice. Viewing this e-mail or e-mailing the account holder does not create an attorney-client relationship. NOTICE: This page may be considered advertising material.