With so many options available for investing (stocks, bonds, cryptocurrency, etc.), deciding which one is best for you can be a daunting task. In my opinion, there is one investment that shines brighter than the rest. Real estate. Whether you are flipping homes or holding rental/multi-family properties, the housing market has many combined advantages that you wouldn't normally have such as leverage, tax benefits, appreciation, and principal paydown. Here are 4 Basic Rules to Investing in Real Estate that will get you on the right path in real estate investing.
HAVE A PLAN
The first thing you need to do is sit down and create a plan that will help you stick to your investing philosophy. What is your goal? To flip homes? Buy and hold rental properties? What is your desired rate of return? What kind of exit strategy do you have? Whether it be flipping 4 homes per year or buying rental properties, you need a clear and concise plan. This will keep you on the right path and help you qualify potential investments much quicker. Time is valuable, being efficient with it is critical in real estate investing.
FIND A REALTOR® YOU TRUST
Once you have a clear plan, you need access to the deals in your market. The best way to do this is by developing a relationship with a real estate agent who is knowledgeable in real estate investing. Realtors can help you achieve your goals, negotiate on your behalf, and sort through the plethora of deals available on the market. Some can even provide off-market deals as well! Once you let your Realtor know what you are looking for they can provide you with properties that best fit your investing criteria.
LOCATION, LOCATION, LOCATION!
Though it may be cliché, this is one of the most important rules. The name of the game is finding properties that meet your criteria in the best areas of town. You want to look for areas that 1) have appreciated year after year, 2) report low crime rates, 3) are in good school districts, and 4) are safe from flooding. If you are interested in building or developing property, investing in areas that are growing at fast rates is very important. Finding properties that meet your criteria and are in great locations will ensure that you have multiple options and exit strategies if your main plan does not succeed. Just like a stop-loss in the stock market, by investing in good locations you can protect yourself from shifts in the market.
Real Estate investing is very lucrative which is why it attracts competition. You are going to find that when you start investing, you are probably going to get outbid by the competition. Remember, it's important to stick to your plan and stay patient. The last thing you want to do is get impatient and force your way into a bad deal. Your Realtor will help navigate you in the right direction as well. Remember, all it takes is one good deal to get your foot in the door and get the ball rolling. Stick to the plan.
Though there are many more factors that go into real estate investing, remembering these four rules from the beginning can make all the difference. Feel free to contact me should you have any questions, or if you're ready to get started!