Have you thought about buying rental properties or Fix and Flips? Investing in real estate is a great way to create passive income. Real Estate Investing is also one of the best retirement plans, no matter what happens to the economy and the stock market your real estate portfolio will continue to produce income. Just think about it, people will always need a place to live.
If your interested in rental properties or fix and flips I want to help you understand how to get started. Here are the 4 steps you need to take to start growing your real estate portfolio.
- Make a Plan
There is more then one way to invest in real estate. You need to figure out which is the best way for you. It will all depend on your own personal finances and abilities. When I first set out to invest in real estate I wanted to do fix and flips. So, I bought a property for $16,500 and I began to remodel it. At that time, I worked a full-time job on midnight shift. I worked overtime as well so I would easily put in 50 hours a week at my job. As you can probably see, I couldn’t find much time to work on the property. I planned for a 60-day remodel with me doing almost all of the work myself. It ended up taking 6 months. By the time I put it up for sale the market was horrible. I was unable to sell it at a price that worked for me so, I ended up renting it for 3 years and then sold it when the market was better.
In my situation it was not possible to know what the market was going to do 6 months from the time I closed on the property, so I had to adjust my plan to make my investment work for me. In the end I made $20,200 in profit from that property but, things did not go the way I planned.
The best advice I could give anyone thinking about investing in real estate is to “Make a Plan” and stick to it until it doesn’t make financial sense to do so. Every investor I have talked to has told me the same thing, they have broken even or made profit from nearly every single property they have purchased. With my experience I have learned that no matter which route you want to go with real estate investments, you can make money.
There are two main categories of real estate investment properties, fix and flips and rentals. You may only be interested in one of these two or maybe both, either way you will need to make short term and long-term plans. I would suggest making 1 year, 5 year and 10 year plans. This way you will know what you need to accomplish in the beginning of your investing career and be able to keep the big picture in focus at the same time.
If your thinking about going with rentals check out my article “Real Estate Investing: Single Family or Multifamily?” You will better understand the benefits of each type of rental property and it will help you make a better plan.
- Find the Money
This part is going to be different for everyone since no one is in the same financial situation. You might have enough cash laying around to go all cash on purchases but I’m guessing this in not the case. Plus, there are a few reasons to not use all your cash when investing.
I got started with a home equity loan. Most of the investors I know go this route. Even if you don’t have any cash, if you can get an equity loan on your home then you can get started with a conventional loan to purchase investment properties. You can use either cash or an equity loan for the down payment and closing costs on your purchase.
The biggest reason to go with conventional loans on investment properties is that you can buy more properties faster. If you have $50,000 cash you may be able to buy one or two properties and then you are stuck. You can’t do anything until you sell a property or save up more cash. Take the same $50,000 cash and using conventional loans to purchase you could possibly purchase 5 properties and one year after that you can get equity loans on your investment properties, use that money for down payments and keep purchasing more.
$50,000 cash may seem out of reach for some people but don’t worry. I know investors that have gotten started with just a few bucks in their bank and a $20,000 equity loan. If you try hard enough you can find the money.
- Look at Properties That Fit Your Plan
After you have made your 1, 5 and 10 year plans and you have your finances in order, its time to start looking at properties. This is where you need to find a Local Realtor that is an expert in investment properties. You will want to pick a Realtor that has a few rental properties and its even better if your Realtor has done a couple Fix and Flips. You will need to rely on them to find you the right property that will fit into your plan.
I love working with new investors. I have been there I understand their situation and I can relate to them. I have made the mistakes and found the best way to do things to make the most money. I use all my experience to educate them about the whole process and to encourage them. If the Realtor you plan to work with hasn’t had these experiences they wont be able to help as much as someone that did.
You might want to consider getting your Real Estate License and becoming a Realtor. Contact me if you want more information on how to become a Realtor.
- Just Do IT!
You will never build a billion-dollar portfolio if you don’t buy the first property. To be a successful real estate investor you need to have the guts to take a risk. I have had 100’s of people tell me they want to invest in real estate but they are not willing to take a risk. If you have a plan, lined up your finances and found the right property then “Just Do It”.
All investments have some risk involved including real estate. You must make sure you and your agent have done your homework to make sure the property your considering is right for you. If you and your Realtor have done your due diligence then move forward.
I love talking about real estate investing so if you have any questions at all feel free to contact me through email or leave a reply on this article. I will answer all questions quickly!