Every new journey has to start somewhere and real estate investing is no different. There isn’t a successful investor out there who knew everything there was to know before getting started. It all begins with your first property and most of what you learn will come from experiencing real situations. With that said, here are some small steps you can take to get started in real estate investing.
Assess Your Financial Situation
The first step is to find out where you stand, financially. There are plenty of creative financing ideas for investors with little or nothing to spend, but many of your deals will require conventional financing. This means you’ll also have to look at your credit files and fix any errors that come up.
Remember that conventional financing may require as much as a 20 percent down payment. If that’s out of the question, consider living in the property for awhile. You might get a better deal (with a lower down payment and a better interest rate) as an owner-occupant. If this is your first home, ask an agent about any programs that can get you into a house for little or no money down. Keep in mind that in order to qualify, you may be required to live there for a year or two. That’s a small price to pay, if it saves you a ton of money on your first property.
If you do qualify for such a program, you may still have to pay for the closing costs. If your credit’s good, you can always use a credit card for this and pay it back as quickly as possible. Just remember that this property is an investment and if you allow finance charges to accrue on anything you spend toward the property, you’re eating away at your own profits. The same can be said of taking out any small loan to cover minor expenses.
Meet Other Investors
Networking is a great way to learn how things are done in the real world. You might even get leads on properties that you wouldn’t have known about any other way. Use the Internet to find real estate clubs in your area and meet as many investors, agents, lenders and property managers as possible. Keep your eyes open for other investors that may be interested in partnership opportunities down the road. You may find an experienced investor that’s willing to put some cash into a deal for both of you, if you’re willing to do the leg-work. Whatever arrangement you come up with, you’re likely to learn quite a bit from the experience.
Find a Good Bank
The closer your relationship is with your banker, the better. You might even find that local banks tend to be friendlier than the major banks, who may treat you like a number. These smaller banks may also be easier to work with if your credit is somewhat weak. If you don’t like the bank you’re using now, ask another investor who they would recommend and ask to see their branch manager. Don’t be afraid to introduce yourself and tell them you’re a real estate investor. Get information on all their services and inquire about the rates on their mortgages.
Look at Lots of Properties
Don’t buy anything until you’ve seen several properties in various neighbourhoods. One of the best ways to accomplish this is to work with a real estate agent that has access to all the listings. Remember to be selective when choosing one, so you won’t end up with an agent who has no experience with investors. The best ones to work with are those who have investment properties of their own. They’ll know exactly what you’re looking for and can save you lots of time. For more information on working with an agent, visit www.rabennett.co.uk.
Evaluate Their Income Potential
Learning how to recognize a good deal involves evaluating a property’s income potential. Whether you’re working with an agent or the actual owner, you’ll need a list of all expenses, taxes and utilities. If the owner has been collecting rents from the property (single or multi-unit property), you’ll need to know how much each unit is bringing in. Then figure out how much the mortgage is going to be and add it to the monthly expenses. Study the condition of the property very carefully, take note of anything that might need repair and get estimates. If there’s positive cash flow left after taking all these expenses into consideration, it might be a good deal, provided you can acquire financing.
Remember, these steps are designed to set you up for a successful start. Just because you ran the numbers on one or two properties doesn’t mean that either of them should be your first purchase. The more properties you see and evaluate, the better you’ll get at it and the more confidence you’ll develop. When everything finally does look good and your bases are all covered, the only thing left to do is take the plunge. Don’t be afraid to get your feet wet. As with anything else in life, real estate investing is best learned through experience.
Erin Sanderson has built a property portfolio from scratch and likes to share his ideas and experiences with an online audience. He writes for a number of different property and investment