For any Millenials considering or even beginning to scope the real estate world, you’re on the right track. Real estate investing is one of the smartest moves anyone could make, considering the versatility and potential returns. Investing in property comes with neat benefits like passive income, tax benefits, and full control over not only the property and your investment strategy but also your profits.
That being said, deciding to invest in property can be super daunting. Where do you start? What do you do with the property?
To nudge you in the right direction, here are some essential things that Millenial real estate investors should know before jumping in.
Know your budget and credit score
While it’s not necessary to be wealthy to invest in real estate, having some savings will help buffer any risks from investing or at least reduce the uncertainty.
Establish a financial goal and investment strategy
Know your goals and the best plan to get there. Generally, most investors don’t need to pay for an entire, say $250,000 property. This is for the Millenials who are still struggling to pay off school debt: don’t worry, you can invest as well. The cool thing about real estate investing is you can purchase most properties with a down payment, which tends to about 20% of the total price. Options like getting a bank loan or lending from a trusted partner are also helpful for millennial real estate investors with limited cash at their disposal.
Scope the market
Knowing where to look for viable property options requires looking at patterns like population growth, rental demand, and job availability.
Consider the type of property.
Here, you have a few choices at your disposal. The top types of real estate include single or multi-family properties, syndications, or buy & hold turnkey funds. Single or multi-family properties are in high demand and involves a short-term strategy. Syndications are larger, commercial properties with a group of investors, resulting in less risk. Turnkey real estate funds are longer-term investments that offer immediate passive income from tenants already living there.
When you know the type of property you’re looking for, it’s time to take a look at locations you’ve identified based on the real estate market. With your budget in mind, figure out if you want to flip a house or if you’d rather be a long-distance landlord for a turnkey property.
Above all, millennial real estate investors must continue learning and growing. While the first step is to try it out without hesitation, further education will make Millenials savvier in their real estate journey.
When it comes to real estate, a foreclosure may seem like a good deal. However, those amateur investors or home flippers might not realize what it takes to make a foreclosed home into an investment that pays off. Furthermore, even homebuyers should make sure to be aware of what a foreclosure requires to make a good home.
Purchasing a foreclosed home is similar to buying a used car from an auction. Consumers can save a lot of money if they have the time to search out these deals. A little bit of luck doesn’t hurt.
However, the people who do the best with these types of sales are those who are familiar with the product and make the call whether the lower price is a deal. Just because a foreclosed home is worth less than the property assessment doesn’t mean the estimate is correct. The professionals know this, but new investors may not.
This experience and knowledge help buyers make wiser decisions and mitigate risk. Instead of just looking at the price differential, they consider factors such as location. Is the home in a neighborhood where it’s likely to sell? Does it have unique features that help it stand apart from other properties? What work will be necessary to sell the foreclosure at a profit? Even if homeowners have no plans to sell soon, they need to consider the future resale value of their purchase.
Furthermore, investors must have a strategy that includes property acquisition as well as holding it until it sells. If an investor doesn’t consider the overall real estate market, which includes job and population growth, this property could be on their hands for quite some time. Investors may even lose money due to property taxes and maintenance costs.
Finally, the smartest investors know that foreclosures may not be the way to get the most bang for their buck. Some investors spend time listings of future auctions and content owners or lenders before the auction occurs. While this might not lead to a better price, it can ensure that an investor can close by eliminating the competition and eliminate the need to have cash for an auction. That lengthy closing process can also interfere with a homeowner’s plan to move.
Investing in real estate is a proven way to build wealth over a long period of time. In many markets around the country, real estate prices are increasing rapidly. As a result, it is a good time for real estate investors to purchase a property.
There are various strategies to invest in real estate. Some people prefer to purchase a property and rent it to tenants. This is a great way to generate cash flow and additional income each month. Other investors would rather purchase a property in need of various repairs. After investing time and money into a property, the investors can sell the property for a quick profit.
One of the biggest obstacles in purchasing a real estate property is getting the capital needed. There are few people who have the cash on hand to purchase a real estate property. Getting an investment loan is much more difficult than a typical housing loan. Banks have to take additional financial risks in order to lend money to investors. As a result, investment loans generally have a higher rate of interest than typical home loans.
As an investor, it is a good idea to shop around for various loan options. There are many people who choose the first loan option that is available. Getting a slightly lower interest rate can make a huge difference in the total amount of money made by the investor.
In a competitive real estate market, it can be difficult to find a property to purchase. Working with an experienced real estate agent is the best way to find a great deal in the local area. Most real estate agents know about new properties on the market before other people do.
Before working with a real estate agent, ask them about their experience finding investment properties. Finding an investment property is a much different process than finding a typical home.
It is vital for real estate investors to spend time screening tenants. Nothing is more difficult than dealing with bad tenants. Some real estate investors make the mistake of trying to rush the tenant screening process. Losing a month of rental income is worth finding the right tenant. Some people even give their tenants a small discount on rent if they pay at the right time each month.