10 Tips For New Real Estate Investors
Real Estate Investments in Houston
Many investors today want to add real estate to their investment portfolios, but they don’t understand the complex nuances of real estate investing or how to begin the process. Real estate investing is substantially different from investing in stocks, bonds, and CDs, and it can seem overwhelming to brand-new investors.
Real estate investing doesn’t have to be difficult or scary. When done correctly, real estate investing is one of the safest and best long-term wealth-building tools in the world. With that in mind, here are 10 tips to help you successfully launch your real estate investing career.
1) Real estate investing is a business, and you should treat it as such. Start by developing a good business plan, detailing the nuances of starting and running your business, with realistic goals over time frames of one, three, five, and 10 years.
2) Check your credit report to determine your ability to finance investment property. Also, make sure that your total debt-to-monthly-income ratio is low. Often it makes sense to pay down outstanding credit card debt or car loans in order to improve your debt ratios.
3) Find a good bank or mortgage broker in your area if you’re financing your investments.
4) Determine the best areas to look for properties. Some new investors make the mistake of limiting their search to areas close to their home. But often better rental areas may be located a little further away. New investors may think they need to live near their properties in case tenants call about repairs or other problems. But in reality, if the home is put into good repair before your tenants move in, those calls from tenants should be few and far between.
5) Talk with other investors about local real estate. Join a real estate club in your area. Real estate clubs are great places to network with other investors, lenders, and repair service providers. You can often pick up helpful advice about your local market from other club members. Some communities offer courses on real estate investing through adult education or local real estate brokerages. If you can’t find a real estate club or course, consider an online investing forum.
6) Consider multiple sources for buying properties. New investors may think they can only purchase homes through their local Multiple Listing Service (MLS), or by banging on doors in run-down neighborhoods looking for distressed sellers. But sometimes you can find much better deals on real estate auction sites, and these sites make it possible for buyers to easily make purchases in locations beyond their immediate area.
7) Spend time reading about real estate investing. A tremendous amount of free information exists today online about real estate investing. When purchasing a book, look for those that offer practical guides on buying, flipping, renting, and selling properties. Avoid books that claim you can make huge sums of money in 30 to 60 days or 25-year-old books detailing techniques that may no longer work.
8) Find a good Realtor to help you locate properties. Not all Realtors are experienced or even adept at helping investors. Before the real estate crash in 2007 and the subsequent onslaught of foreclosures, only a small percentage of Realtors would even work with investors. Since then, many Realtors have taken courses and suddenly claim to be “experts” on foreclosures. Make sure that you choose a Realtor who has sold a large number of investment properties, and also understands concepts such as return on investment (ROI), net operating income (NOI), and debt service.
9) Look for a return greater than 1% per month of sales price. An old maxim of real estate says that a rental property yielding 1% of the sales price per month is a good deal. In other words, if the home cost $100,000, you should get $1,000 per month in rent, or about 12% annual yield. But in many areas of the United States today, home values have declined substantially and investors can now achieve greater than 1% per month returns.
10) Learn from the best. To achieve success, model your investing decisions after what other successful real estate investors in your area have done.
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Real Estate Investments in Houston.
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