Nowadays, many investors have a desire of adding real estate to their investment portfolios, but fail to understand the complex process of real estate investment. Investing in real estate is quite different from that of investing in mutual funds, bonds and stocks and it may seem quite overwhelming to new investors. However, real estate investing is not that scary or difficult. While investing, one needs to know how returns should be maximized and risks should be minimized. If these things are done correctly, investing in real estate is the best and safest tool of long term wealth building. Given below are 8 tips that would surely help first time real estate investors.
1. Investing in real estate is business
One must treat this investment as a business. A good business plan should be developed at first and nuances of starting the business should be detailed. Realistic goals should be set over a time frame of 1, 3, 5 or 10 years. If one doesn't know how a business plan should be written, there are several websites that would help.
2. Credit report should be checked
This will help in determining the ability of financing the property. Today, 700+ scores are demanded by most of the lenders. Also, ensure that the total ratio of debt to monthly income is low. For improving debt ratios, outstanding car loans or credit card debts should be paid off.
3. A good mortgage broker or a bank should be found
If the investments are being financed, a good mortgage broker or a bank should be determined on. Consult realtors as they would definitely give good recommendations. This should be done before the search for property starts. If cash is being paid, give a proof that you have the necessary funds.
4. The best areas for properties should be checked
Usually, new investors restrict their search only to areas that are nearby their homes. However, good rental areas can be found little far away. Investors think that they should live near the property in case tenants contact them for problems or repairs.
5. Talk to other investors and get an idea
A real estate club should be joined in the area. They are great places for networking with repair service providers, lenders and investors. Helpful advice about the local market can be obtained from club members. Courses too are offered here through local real estate brokerages. If a real estate course or club isn't found, an online investing forum can be joined.
6. Multiple sources should be considered for purchasing properties
Sometimes, there are great deals found on real estate auction sites. Hence, one doesn't need to restrict himself to MLS i.e. Multiple Listing Service for buying properties. With these sites, purchases can be made easily.
7. Spend some time to read about real estate investing
Today, there is lot of information available online about investing in real estate. In case you wish to buy a book, consider buying practical guides on selling, renting, flipping and buying properties. Books that make claims of making you earn huge sums of money in a month or two should be avoided.
8. A good realtor should be found out
Not all realtors are adept or experienced in helping the investors. While buying properties, make sure that such a realtor is chosen who has sold lot of investment properties in the past and understand basic concepts like NOI, ROI as well as debt service.
So, always remember that more the efforts that are put in, the better would be the deal. So, keep these tips in mind and you would definitely be rewarded. Good luck!