The real estate industry is a fantastic space for retail investors to energize their portfolios and make enormous profits that will boost them into retirement and beyond. Property is one of the best investments you can make as a saver, but the real estate industry doesn’t simply offer free growth or capital returns to its investors. There is a long learning curve that you will have to travel along in order to understand the ins and outs of the marketplace and begin to see giant returns on your investments. That being said, the learning process doesn’t have to be painful. Taking the time to understand the market before diving in is the best way forward and it will teach you all that you will need to know about real estate investments and the industry itself.
1. You can and should invest with little upfront capital.
The best way to enter the real estate market is through the lower risk avenue of REIT investing. A REIT is an index-type fund that trades on the stock market. These investment vehicles present investors with a much lower risk alternative to the true property market, but also provide access to the high level yields that many investment properties themselves can kick back to their owners. With a REIT you can learn the ropes of real estate investing by reading through the prospectus of your fund and identifying trading patterns that the pros are using to target high value real estate properties and local markets. With real estate investments, it’s all about the research. Starting in a lower risk marketplace and learning how these trades and deals are made is the best way to advance slowly and confidently into the bigger sea that real estate investing provides its pool of investors.
2. Research is king when moving into the property market.
Research drives the market. At a baseline level, property pricing is determined largely by a price per square foot figure that is derived from the local marketplace and similarly valued units in the area. However, there are a number of other factors that contribute to a higher or lower price per square foot in any given property. Looking into Ashe County real estate, for instance, buyers can see that a home with a grand mountain view will always yield a higher purchasing price over those with less scenic vistas or none at all.
3. Retail investors need to understand the upkeep demands upfront.
When you finally move into the property market and angle to make your first purchase, it’s important to keep in mind the upkeep requirements of the home you are considering buying. Each home has different needs and will require upgrades and renovation work that is unique to its four walls. However there are some fixes that are universal. Searching for the best energy efficient windows in Tampa, for example, is something that all Florida homeowners do when purchasing a home with older window panes. Windows are a crucial component to an efficient and comfortable home, especially in a climate like Florida’s. With hurricane season threatening the state’s infrastructure each fall, and the blistering heat of summer that’s followed by bitter chill during the winter months, Florida sees some unique shifts in weather that make home maintenance a tricky challenge.
Keeping your property in the best possible condition means that you will need to commit to conducting routine maintenance on the home. Each spring you will have to climb up on the roof to clear off debris from the shingles and gutters, and during the changes in seasons you will want to have your air conditioning unit checked for weaknesses by your local Direct AC specialist. Air conditioning is critical in Florida; a summer day without cool air blasting through the home is like a day trapped in an oven. It will make you rethink putting off those home upgrades.
For rental property managers this problem presents itself in a more direct way. If your tenants are stuck without working air conditioning you are likely to lose their business at the end of the lease term. This means you will need to find new renters far more regularly and will have to shell out precious capital in order to list the property and get new tenants in. Going into the real estate business means you will have to be proactive about home repairs and upgrades that are due on the properties that you own. Understanding this obligation upfront will help mitigate surprises down the road.
4. Financing a purchase might be easier than you’d imagine.
Those new to real estate investing often underestimate the power of collateral and financial instruments designed to facilitate the purchase of property. Home buying is a unique industry in which financial institutions are in bitter competition with one another to secure borrowers within their slate of mortgage products. Those with an excellent credit score can secure financing with little hassle and often find that they can take advantage of a fantastically favorable interest rate and set of repayment terms. Banks are happy to lend to those with well-managed credit because they can trust in the investment.
Buying a home is an investment for the new owner, but the bank is also investing in their success. In order for the bank to recover the money it has disbursed it needs you to succeed in whatever ventures you engage in. This could be your salaried job, or a new career as a landlord. Taking advantage of financing offers is, without a doubt, the best way to move into the property market.
5. The most successful investors turn this revenue stream into passive income.
Finally, once you have found success in real estate investments, you can consider transitioning these properties into truly passive income streams. By hiring out the property management functions you pay out a percentage of the rental income that you make each month but can pass on all the responsibility of collecting payments, organizing repair work, and listing the property when a tenant moves on to a firm that specializes in this type of work. Going passive in the industry is the end product that the most successful investors strive for.
The real estate market is a lucrative opportunity, but in order to take advantage of its fruits you need to know your stuff. Begin your journey into property investments with a firm foundation of research in order to achieve long term success.