You’ve decided to invest in real estate, but you aren’t sure quite where to get started. You are definitely not alone. There is strong interest in developing passive income streams through real estate investing. This guide presented by Strong Bros Properties LLC will help you identify the things you need to do to prepare for your first purchase and manage your new property.
Assess Your Finances and Develop a Budget
Investors fall all over the spectrum in terms of their financial situations and current holdings, so there is no set test to see if you are ready to take on an investment property. It is helpful to develop a realistic picture of your financial health before you begin looking at properties. Use that information to develop a realistic budget. It should take into account covering the costs of your new property if it is unrented or before you resell it if you plan a fix-and-flip.
Determine What Type of Property You Want to Buy
While first-time investors tend to gravitate toward single-family homes, they are not your only choice. You may have more success and feel less financial strain purchasing a duplex where you can live in one unit and rent the other. Or, perhaps a single-family home with an accessory dwelling on the property is a better fit for your lifestyle.
It is worth considering multi-family properties if your budget allows it. These provide a wider rental base, so one or two vacancies may not affect your bottom line as much as in single-family homes. Just be sure to check vacancy rates at the property in question before you make a decision; a history of empty units might be cause for concern.
Explore Funding Options
Once you have identified a target property, you will want to plan how to fund your purchase. If you have the cash to purchase a property outright, that might be a good idea. However, you may be better off taking advantage of any tax benefits available through financing. A few of the most common financing options for investment properties include hard money loans, conventional mortgages, and using the existing home equity in your primary residence.
You might also choose to partner with a private investor to share the risk. Keep in mind you will also share the rewards of your investment if you choose to partner with someone and, should he or she fail to meet the obligations, you may be responsible for those liabilities. Educational opportunities with experienced real estate professionals such as Strong Bros Properties can be very helpful as you navigate the process.
Establish Sound Property Management Practices
There are two basic methods for property management: You can go it alone and handle the day-to-day management yourself or hire a property manager. While managers add to your expenses, they make the process much easier by handling administrative tasks and emergency requests. According to Realtor.com, a property manager handles many of the tasks you might not even realize exist. The National Association of Property Managers offers an online tool to help you find a qualified manager in your area.
Real estate investing can be a worthwhile endeavor; however, it is also a complex process for the uninitiated. Start out by assessing your finances. Then, determine the right type of property for your needs and goals and a financing strategy that fits with your budget. Once you have purchased a property, you’ll need to decide if you want to manage it yourself or hire a professional to handle day-to-day operations. Moving deliberately through each step will help make purchasing your first investment property more manageable.