Are you dipping your toe into the pool of real estate investment? Well, stop wasting your time and dive right in. Sure, when you’re starting out in this market, it can be scary and confusing. But hovering on the sidelines isn’t doing you any favors.
You’re not going to lose money, true—but you won’t be making any either. Take the plunge, take that risk, make it happen, follow your dreams.
There are two main ways to enter the real estate game: through a real estate investment trust (REIT) or through direct ownership. A REIT is more like a stock than anything else; you’re basically buying a share in a property portfolio. With good research and sensible investment, this can make you a lot of money. But it’s not very hands-on, the stock market can be volatile and unpredictable, and you can’t borrow as much against your shares as you can against a property should you apply for a mortgage in the future.
If you want to get truly involved in real estate, then the best way is to purchase a property yourself.
3 Strategies to Make Money Through Investment Property
When considering how you want to make money through property, there are three main strategies:
- Long-Term Capital Growth: Basically, property prices are continually trending upwards over time. Buy a property now and hold onto it for a long time before selling it for significantly more years down the line. You can do this with your own family home and make use of the property whilst literally sitting on a pile of gold. The longer you keep the property, the smaller your mortgage will get, and the larger the cash payout will be when you finally sell.
- Positive Cash Flow: This is what comes from renting, whether commercial, or domestic dwellings. These properties should be spitting cash flow at you through monthly rent payments, making them a safe and valuable investment and often a great way to start out in the real estate game. Your initial cash flow may not be vast, but if you get a few properties under your belt, you’ll quickly see a steady return.
- Adding Value: Rundown, dilapidated properties can generate huge returns if you can just see the potential. Ignore the leaky roof, the moldy walls, and the door hanging off its hinges and try to imagine the place completely renovated. If you’re creative or have a flair for design, this could be the ideal strategy for you. Yes, you need cash to invest in structural and/or cosmetic work, but the initial cost will pay dividends when you’re ready to sell.
Whatever aspect of real estate you’re interested in, if you want to make a success of your first direct ownership investment and begin earning money for both you and your family, here are a few handy tips.
If You’re in, You’re in
Commit. Do it. Take the plunge. If you don’t, someone else will.
When you’ve worked out which strategy works for you and then found a good deal, don’t hesitate or worry too much over the details. Once you’ve seen a property you like, follow through and buy it. The property market is strong at the moment, so even if your plans don’t unfold exactly as you wanted them to, you’re unlikely to lose any money. The property itself won’t drastically drop in value, so if it’s not performing the way you had hoped, sell it, learn from your mistakes, and move on.
It’s important to demonstrate your dedication and commitment to a new project, and there are many ways to do this. Attend every meeting with your real estate buddies, prospective renters, buyers, etc. Responding promptly to emails is vital when creating a dependable, reliable image for you and your emerging real estate brand, especially if you’re going to be a landlord.
And if you’re not sure about something, ask for advice from those already successful in the real estate game. There are countless blogs on the internet for real estate investors, but if you have a specific question, go ahead and ask it. Don’t want to do it in real life? As over the internet on the BiggerPockets Forums.
If you’re going to be renting out your property to tenants, make sure you know what being a good landlord entails. Once you’ve bought the property, the work doesn’t end. In fact, it’s just beginning. Make sure you’re aware of what is expected from a landlord. It’s not just about finding tenants, but also maintaining your property and ensuring your tenants hold up their end of the bargain. In order to make a success of this business, jump in with both feet in every aspect—from the purchase of the property to the management side of being a landlord.
Everything needs a 100% commitment from you.
Don’t Get Caught Up in Analysis Paralysis
Yes, numbers are important. Yes, research is vital. But if a prospective property looks great but there are just a few glitches, look past them and see the potential. You might have come up with a concept for investment in your home office over the past few months, but nothing, in reality, is going to perfectly match your strategic outline.
Don’t expect it to. Work with what’s available and stop stalling. Yes, you need to consider how to achieve the best possible return on investment (ROI), but as long as you’re not going to lose money on your first purchase, then you should go for it.
Imagine you were intending to follow a positive cash flow strategy, but you’ve found a property in the perfect location and for a great price needing some work before it can be rented out. This means mixing added value into your plans. True, getting contractors in will delay the day when you first see a return on your purchase from renters and will initially cost you some cash, but think of the potential. You’re probably getting a great deal on the property because of its condition.
Envision the high rent rates you can charge with a new, high spec finish. You may not have anticipated building work in your initial budget, but that doesn’t mean it’s necessarily bad. Work with what’s out there in the market at the moment rather than waiting for that imaginary, perfect property.
And remember: the property market is flexible. If the figures aren’t quite adding up for you, make the seller an offer. The price a property is advertised at is rarely the price it sells at. Negotiate to get the best deal for both of you, and don’t walk away just because the initial figure seems unattainable. Keep an eye out for cheap properties, but don’t rule out those that are more expensive.
“Keep it simple, stupid.” You’re not stupid, of course. But beginners in the real estate business can make stupid decisions, chief amongst them being passing up on a great deal.
So what if the numbers are a little different to the idealistic plan you’d come up with? So what if the property is smaller than you initially wanted? You have to start somewhere, right?
Every experience, good or bad, will teach you something. The more experienced, the savvier you will become, and the stronger your personal property portfolio will grow.
You don’t need experience to start out in the property game, however. Thanks to the currently strong housing market, real estate investment is a safe bet. Even buying a family home, living it in for a few years, and then selling it on without doing anything will make you a tidy profit and allow you to purchase a bigger house. It couldn’t be more simple.
And you should keep it simple. For your first purchase, don’t be too ambitious. A small property, in an area you are familiar with, is a sensible place to start. You may dream of owning a high-rise apartment building with dozens of tenants, but don’t get ahead of yourself.
Work up to that, taking sensible, realistic steps towards your dream, and you’ll get there in the end.
We know it might be daunting to put your foot on the first rung onto the property ladder. You needn’t worry. With the market as strong as it is today, you can rest assured that your money is safe. And if there is a dip in the future, all you have to do is keep hold of the property and wait for the value to rise again.
Because if there’s one thing you can always count on, it’s that the trajectory of the housing market is always, inevitably moving upward. So what are you waiting for? Get investing now and begin your new journey into the world of real estate investment today.
I wish you much success.
What are you going to do TODAY to take action towards your real estate goals?
Let me know with a comment!