Doing Property Investment Properly: A Beginner's Guide

Posted: Dec 4 2019, 11:13pm CST | by , in How To

 

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Doing Property Investment Properly: A Beginner's Guide

It's not hard to see why investing in real estate is appealing. Get it right, and you could give your finances a huge boost with not very much effort at all. However, get it wrong, and you could find yourself in dire financial circumstances.

Even if you already own your own home, that doesn't mean you know the process of buying investment properties. Don't rush into anything. Do your research and make decisions that are right for you, your family, and anyone else involved in your real estate projects.

We buy houses in the Los Angeles market every day. Here are our tips for getting started with real estate.

Understand your finances.

It may seem obvious, but before you get started with growing your wealth through real estate investments, you need a thorough understanding of your current finances.

Start with where you’d like to go and think about how to get there. If you don’t currently have the capital to get started, how will you get there? How can you change your current financial situation to make that dream come true? How far away are you, both financially and in terms of timescale, from buying that first investment property?

It's essential to be honest with yourself at this stage. It's no good pretending that you're closer to the goal than you are. You'll only be disappointed when it doesn't work out.

Strategize.

You need to think about what you want from your real estate investments and come up with an appropriate strategy. Do you want to simply earn extra income and keep real estate as a side project? Keep your day job? Become a leasing agent? Manage properties on behalf of other investors? You may think of your investment property as a long-term savings account, or as a ‘flipper’ where you can get a huge return on investment. You might want to simply increase your net worth by building a portfolio of assets.

Whatever your strategy, you must remember – life changes every single day, and you need to be flexible. But then, having a strong strategy that can be adjusted is key, as it will help you focus and boost your confidence with strong knowledge and a definitive plan.

Pick a property.

Deciding what you want from an investment property is just as important as deciding what you want from your own home. Get it wrong, and you may struggle to rent the property out, leaving you paying two mortgages with no additional income. You should think about what you want from your investment property, not just in terms of rooms, space, area, etc. but also how much you want to spend, what you want to charge in rent, what you're likely to pay in taxes, and so on.

This can be quite a complex process as the specifications of your property will inform the numbers side of things and vice versa. You may find that you have to sacrifice something you want from a home to make the project affordable. Make sure you know what things you'd be happy to let go of. Being informed about what you want, and how likely you are to get it, will make it much easier to jump on a great deal when you see it.

Of course, your criteria may change significantly over time, but that doesn't mean being specific about what you want isn't essential. You can always come back and adjust whenever you want.

Finalize the finances.

To invest in real estate, you'll need cash. How much is up to you, but there's simply no way of taking on real estate projects without serious capital. What's the best way to raise the money?

The first thing to do is to look at your budget. Decide how much (if any) of the down payment you can afford to lay down yourself. You also need to take other costs, such as closing costs, taxes, and realtor fees into account, and make sure you leave a good amount of cash in reserve for renovations and rainy days.

If you can't afford the entire down payment by yourself, there are other ways of getting your hands on the money. You could wait, and simply save more. You could sell existing assets you may have. You could go into business with a partner who puts up some of the money, or you could borrow the down payment. If borrowing, you'll need to make sure that any rent payments you get for your new property are enough to cover the mortgage loan and any interest. If not, you'll quickly find yourself paying out of pocket expenses.

Set realistic schedules.

Most people getting into real estate do it alongside their day job, so being realistic about the amount of time you have to dedicate to getting your portfolio off the ground is really important. Sit down, with your partner or family if you need to, and think about how much time you have, and how important real estate is to you. You may find that you want to change a few other things about your daily life to make more time for your new venture. Be honest with yourself. There's no point deciding to set aside more time than you have. It's a sure-fire way to fail.

The Next Steps

When trying to get into something like real estate, you want to focus less on how much time things take to achieve and more on what your actual goals are, and how to achieve them. You need to spend time considering what you need to do to move toward these goals, and constantly reassess to make sure you're still moving in the right direction.

Once a goal has been achieved, set a new one. Setting smaller goals tends to be easier and helps keep motivation high. It also ensures you're regularly checking in on your progress. A goal could be as simple as 'read this book about real estate.'

This story may contain affiliate links.

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<a href="/latest_stories/all/all/2" rel="author">Luigi Lugmayr</a>
Manfred "Luigi" Lugmayr () is the founding Chief Editor of I4U News and brings over 25 years experience in the technology field to the ever evolving and exciting world of gadgets, tech and online shopping. He started I4U News back in 2000 and evolved it into vibrant technology news and tech and toy shopping hub.
Luigi can be contacted directly at ml[@]i4u.com.

 

 

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