At first glance, learning how to get started in real estate investing may seem pretty intimidating. After all, there’s a lot to learn about tax laws, becoming a landlord, financing, marketing your home, etc.
But the key is to take things one at a time. You’ll have difficulty finding a home to buy if you don’t know how much house you can afford. You can’t fix up a home until you actually buy it. There’s no reason to do heavy marketing to rent out the home until its ready.
Here’s a short and simple guide to help break this process down:
- Work Out the Financing
- Determine a Target Area
- Find and Purchase the Property
- Market It
- Rent it Out
That may seem simplistic, and it is! But you’ll see that when you break it down like this, anyone can get started in real estate investing and have their first property in just a few months.
Step 1: Work Out the Financing
There are 300 million people in the U.S., and 300 million different financial situations. Whether you own your home or rent, make $200,000 a year or $20,000, have rich family members or not- everyone’s situation is unique.
So the best thing to tell you is, based on your current situation, find out what kind of financing and money you have available.
Go to several banks and see if they’d approve you for an investment property mortgage. If so, great! If not, see if you can borrow cash from a family member or friend to help sweeten the deal.
Chances are good in this economy that, if you have some kind of steady income and you aren’t strapped in too much debt, you can get a loan for some amount. That might mean you start by buying a small condo or looking at small homes in suburban areas, but rental property is rental property.
Step 2: Determine a Target Area
This may sound like a logical first step when you are getting started in real estate investing, but think about this- what if you determined an area first, then found out you can’t get enough money to buy a home there? Then you’d have to start back at step 1.
Instead, now you (hopefully) have an idea of how much money you have access to. That lets you target a good neighborhood in this price range.
There are several things to consider when looking at neighborhoods/towns:
- Is this area growing or falling apart?
- What are the schools like?
- What are the income levels like?
- What are the homes like?
- Is the area safe?
- Is it in a military or college town?
- Is it close to your home?
All of these things play a factor. For example, military and college towns always have new tenants coming and going. Having rental properties closer to your home make them easier to manage (if you don’t hire a property management company and do it yourself instead.)
Step 3: Finding and Purchasing the Property
Whether or not you use the services of a professional, such as a Realtor, is up to you. They offer several advantages and disadvantages, but you may find it easier for your first few purchases to use their help.
There are two big things to keep in mind with property:
- Don’t let emotions cloud your judgement (so don’t fall in love with a property or hate it from the start)
- You profit when you buy the home
It’s difficult to make good money with a rental if you don’t get a great deal. You might still do okay if you buy it at the full market value, but this will lead to higher mortgage payments, cutting into your monthly profit.
As far as buying a fixer-upper or a home that’s move-in-ready, that’s up to you. Obviously a fixer-upper will be less expensive, but the learning curve will be much higher.
Step 4: Market It
There are a few ways to market a home for rent- a sign out front, a realtor or property management company, online classified ads, etc.
The key is to market it hard and as quickly as possible. Every day it sits vacant is a day you’re losing money!
That doesn’t mean you qualify the first person to apply to rent it out- you still have to do your due diligence. But the main reason landlords struggle to rent their property is either the price is too high or they don’t market it well enough.
Step 5: Rent it Out
Obviously this step includes several things such as writing up a contract and (hopefully) doing background checks on the people that applied to rent the space. But once your tenant is moved in and paying you regularly, you can breathe a sigh and begin to focus on the next property.
Again, this guide on how to get started in real estate investing may seem a bit basic- and it is. At less than 900 words long, there’s only so much that can be covered.