How to Become a Real Estate Investor
Where do I start and how do I become a real estate investor? This is the million dollar question that makes the difference between sitting on the sofa watching your life pass you by, or turning your goals and dreams into reality!
Here are the steps to get those wheels in motion and live the dream of being a real estate investor.
What type of real estate would you like to invest in?
There are three main categories of real estate: commercial, residential, and associations. Each category has its own unique advantages and disadvantages. Real estate investors should choose one type of property based on their financial status and investment priorities. To find out more on which type of property to invest in, read Commercial Properties, Pros and Cons and Home Owners' Association.
Where would you like to invest? The answer to this question should consider both your priorities as an investor, and the demand for rental property in the area.
Priorities differ for each real estate investor. Some real estate investors prefer to purchase rental property close to where they live, this allows them the opportunity to personally keep an eye on the rental property and do their own maintenance. For these real estate investors, the areas and number of properties available are limited geographically.
Other investors attribute less importance on the vicinity of their investment property and hire a property manager to manage and oversee the rental transactions and maintenance necessary. These investors have more opportunity and choices available to them, however, must also entrust their investment to a property management company. This is why it is important to choose wisely when hiring a property management company. To find a credible property management company, browse through our localized directory. All property management companies listed are credible managers that have been carefully researched by our team.
The next real estate investment step is to evaluate your rental market! If there is no demand for rental properties, you may be throwing your money away. First, pick a geographical area that offers a significant amount of rental properties with a low vacancy percentage. If there are a large number of rentals sitting vacant, this geographical area may not be wise to invest in as it may be too hard to find a qualified tenant. A great way to find this information is by calling a local property manager or realtor in the area. Is the area you are considering investing in a developing community? Another item to consider is the foreclosure rate in that area, asking these questions will give you an idea of the rental market and whether the market may increase in value and offer return on your investment.
Determine the rental value of the property. If you decide to hire a property manager, they will help determine the rental price for your rental property. If you decide to set a rental value yourself, be prepared to do some research. The best way to do this, is to research the other rental properties in the area and use their rental price as a benchmark. Things to consider when determining the rental value of your property is the size, the condition of the neighborhood (whether it is higher end or lower end), the amenities offered, expected cost of utilities, garages, parking offered, and what appliances are included (ex. Dishwasher, air conditioning, laundry facilities, etc.). If you set your price too low, you are wasting money. If you set your rental rates too high, your rental property stands the chance of sitting vacant for a longer period of time. It is best to ask a local property manager the average lead time of filling vacanices in the area. With this information, you can determine whether or not you can afford to pay the mortgage if the rental property sits vacant for a long period of time.
