Last Updated on Apr 8, 2020 by James W
One popular strategy that many people use to grow their wealth is real estate investing. Adding real estate investments can help protect your wealth from the volatility of the stock market and add diversification to your investment portfolio.
Real estate investing isn’t a “get rich quick??? scheme. There is a lot to learn especially if you’re just beginning to invest in real estate.
Below are 6 real estate investment tips for beginners.
- Location matters
When it comes to real estate investing, the old adage “location matters???
is most accurate. Even the location inside the neighborhood will have a huge impact on the value of your home.
What makes a great location?
- Is there a view? View properties are highly coveted by buyers.
- The ultimate locations have access to a waterway either on the site or nearby.
- If a location has convenient access to local popular places, shops, and restaurants; it’s sure to bring top dollar at re-sale.
- You want to make sure all your investments are in a safe neighborhood.
- A great school system can make all the difference. 2.Don’t start big
This is an important tip contributed by Realty Management Associates.
Get your feet wet first and explore what it’s like to be a landlord. Instead of buying a 20-apartment complex, get yourself a single condo or house first.
This way, you are able to minimize the risk of your investment while at the same time getting to know the ins and outs of the business.
3. Be aware of tax laws
In real estate investing, understanding tax laws is essential. Typically, property taxes are fixed by the local government, as the money generated by taxes goes to fund local public services like the police and fire departments.
According to experts, property tax ranks just behind the regular mortgage installments in terms of the fixed cost allocated on a property. As such, as a beginner in real estate investing, it could be wise to invest in a market with the lowest rates of property taxes.
These markets include Davidson County, Terrebonne Parish, Hardin County, Baldwin County and Sussex County. Markets to avoid investing in, that is, the ones with the highest tax rates include Milwaukee County, Passaic County, DeKalb County, Bexar County, and Westchester County.
4. Get in touch with local investors
As a beginner, connect with local investors. Hang out where they hang out. Local investors will obviously have a better grasp with what works in your locality. Most investors also love to show off their accomplishments. Learn as much as you can and try to ask for clarifications if need be.
Areas where you can get in touch with many local investors are local real estate investment clubs. These investment clubs are full of networking and educational opportunities. Other areas include real estate forums and social media groups.
5.Get in the habit of reading real estate books
There are literally hundreds of books out there, both free and paid. And if you don’t like reading – at least learn to listen to audio versions. As a beginner, experts recommend focusing on these topics:
- Legal and contracts
- Property management
- Finding and negotiating deals
- Rehab and construction estimating
- Deal analysis
- General principles and strategies
In terms of books, here are some top recommendations for beginners in real estate investing.
- The Book on Estimating Rehab Costs by J Scott
- The Book on Flipping Houses by J Scot
- What Every Real Estate Investor Needs to Know About Cash Flow by Frank Gallinelli
- The Book on Investing in Real Estate with No (and Low) Money Down by Brandon Turner
- Building Wealth One House at a Time by John Schaub 6. Check your credit report
As an investor, the first stage is to understand the importance of your credit score. A credit score comes into play because you are more likely going to need to borrow money to buy real estate.
There are various websites where you can check yours for free. Good examples include Quizzle and Credit Karma. If your credit report is good, great! If not, work immediately on bringing it up by doing such things as:
- Keeping credit card balances low
- Paying bills on time
- Correcting inaccuracies in your credit reports
- Only applying for credit when its needed
You could also opt for alternative ways to obtain financing. Some of these include:
- Private money. These are secured from private groups or individuals looking to diversify their investment portfolio.
- Hard money. These lenders typically consist of individuals or businesses. Interest rates typically range between 10-18%.
- Wholesaling. This is where you look for properties that are offered at a steep discount, renovating them, and then selling them at a higher price.
There is no denying the fact that real estate investing offers the potential for fabulous returns. However, for the unprepared, it can be extremely risky. Hopefully, these 6 real estate investment tips for beginners will help you secure the right investment property.