If you’ve been keeping up with the real estate market, you know it’s currently a seller’s market. The pandemic caused a shortage of houses due to a lack of labor and a low supply of lumber and supplies.
The demand for houses surpassed the supply, causing the value of homes to skyrocket upwards of 5.4% more than their worth. This left fewer people dealing with fierce competition, which buyers are still experiencing.
One homebuyer recently stated they had 43 qualified offers on their house, baffled by the idea that their home would even sell at all just a few years prior.
Because of the high demand for housing, it’s become an incredibly lucrative time for those looking to invest in real estate as an alternative means of income.
Whether you’re looking to flip a house, rent your current home through a property management company, or purchase with the intent to rent, here are six tips to help you get started as a first-time real estate investor.
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Decide The Type Real Estate
There are dozens of avenues you can choose from when deciding to invest in real estate. For instance, you may be interested in purchasing a multi-family home to rent out the property. This is an excellent option for those who are first-time investors. Knowing your end goal will help you determine the right path to take.
On the other hand, you may be interested in commercial real estate property where businesses rent office space from you. This requires an entirely different set of laws and regulations.
Understand What It Entails
Before you decide to rent out your house or buy a new property, you’ll want to know what investing in real estate entails. Either way, you’re diving into the world of becoming an entrepreneur.
Challenges may happen along the way, regardless of home renovations or if you intend to become a landlord. Become familiar with every aspect of your investment strategy before heading to the bank for a loan.
Learn the Market
Every neighborhood has its unique market and demographics. If you buy a house to flip at a price far out of reach for the median family income in the area, you’re going to have a tough time selling it.
You’ll want to have a thorough understanding of the types of real estate your area has, such as single-family homes or apartment complexes. Other amenities such as school districts, shopping, and access to transportation can impact the listing price.
Know Your Budget
When you invest, you’re putting money forward before you’re able to start earning a profit. This is why managing your budget is one of the critical fundamentals of real estate investing.
It’s suggested to have at least 20%, if not more, save for your downpayment. This doesn’t include financing any repairs or renovations you’ll need to make along the way. Talk to your accountant to see if real estate investing is a viable option for you.
Build Relationships Early On
Becoming a real estate investor will require you to have a vast network of professionals. This includes people who already have experience in the field, local contractors, and potential investors to work alongside.
Start building these relationships early on. It’ll be significantly easier to get the ball rolling when you have a network.
Work with a Real Estate Agent
You more than likely aren’t a professional real estate agent. This means you don’t have extensive knowledge of market prices, negotiating, or handling closing contracts.
If you want to find the best property for your investment needs, you want to have a real estate agent on your team. Otherwise, you could end up investing in a property that ends up draining your bank account rather than making a profit.
Summary
As a first-time real estate investor, the idea of making passive income might sound exciting. But know that it comes with its fair share of responsibilities and risks. Do your due diligence by researching as much as possible before making an offer on a property.
