Investing in real estate is when you decide to purchase a property that could increase your personal income every month. Because you purchased that property, you are now a landlord. As a landlord, you are in charge of paying the mortgage, taxes, and costs of maintaining the property. Collecting rent may help improve your financial situation and paying for these expenses will not be an issue. Overtime, some people like to become a full-time landlord instead of working both full-time and overseeing their investment properties.
How To Buy An Investment Property
When you are buying another property, your down payment will be significantly more by 20-25%. You will need to have a great credit score and have enough income coming in to pay the mortgage.
Foreclosures are when mortgage payments are failed to be paid and the bank ends up taking over. They can end up being sold at auctions for a lower price. The highest bid wins and the property is yours as is. Take into consideration the number of repairs that may have to go into the property.
Ask professionals in the industry for tips on how to get into the business. Ask what other costs are to be expected up-front and in the long run. The best possible way to understand is always by doing your research and speaking to someone, since there are lots of things to consider when buying an investment property.
Long-Term Or Short-Term Investments
Depending on if you want instant cash flow or you want to continue investing over a course of years will depend on your type of loan and purchase.
Long-term investments refer to property you will be earning money off of over a longer period of time:
- Small apartment buildings
- Large apartment buildings
- Single-family homes
- Large-family homes
- Student rentals
- Commercial for offices
- Commercial for retail
- Commercial for industrial
There are many different types of properties to consider, and it is always best to start small if you are getting into it for the first time.
Commercial properties often require a higher investment at first but in the long-run, it may generate a more stable cash flow.
People are always looking for an office space to rent out, whether they are real estate agents, lawyers, accountants, etc. It works a bit differently than rental properties, however. On top of paying you rent, they will also pay for repairs and the insurance and taxes.
It could be a good source of income for you, but when they leave, your vacancy will last longer than it does with a rental property.
Retail commercial spaces are great. This could make your income increase and your tax returns get better and better. If a shopping mall goes up on your commercial property, they will obviously lease it out over a long period of time.
Building A Reliable Team
After investing in a few properties, it may become harder for you to juggle the time between them all, especially if you are working full-time.
Do you need to start building a team?
- Property manager
- Home inspectors
- General laborers
If you have a house you are renovating before renting, having these contacts readily available will make the process much easier.
Real Estate Investing Groups
A real estate investment group is an organization that will either build or buy properties and sell them to investors as rental properties.
They could have a duplex built that you have now invested in and in exchange for finding renters via marketing, finding a property manager, and other responsibilities, they collect part of the rent money. They are a great source for people who want to invest in an apartment building but cannot afford it.
Investing in a rental property, whether residential or for commercial use, can help generate a reliable source of income for you. There are lots of steps to the process to understand, but after doing the proper research and speaking to professionals, you may find investing is the right thing for you.
Always come up with a financial plan when you begin. What are your goals? Where do you want to be five years from now? Or 10? Determining where you want to be will help you come up with a strategy.
Remember starting small is key. Once you have gotten used to the lifestyle and can purchase more investment properties, your goals will easily be met.