Getting Started in Real Estate Investing
There are lots of reasons people want to invest in real estate, and usually it has to do with making money. With interest rates at all time lows and prices very reasonable, this could be the opportunity you’ve been waiting for to jump into real estate investing in the Bethlehem area.
In 2004 when I first got my PA real estate license many of the clients I worked with were investors. At the time I called them wanna be investors. These were regular folks who were basically fed up with the stock market returns and since real estate was hot, hot, hot being a landlord was “in”. Maybe you remember the days of late-nite TV shows pitching how easy it was to make money buying, selling and renting real estate? Remember Carlton Sheets?
If real estate investing is something you’ve read about, watched on HGTV, and want to do, here’s what you’ll want to research before you jump in with both feet.
Having some of your own money saved up to invest is helpful and smart, but there are different philosophies out there as to whether you should buy your investments with cash or use leverage and finance all or a portion of the investment. Maybe you have a line of credit to draw from, but if not, you’ll need to check with a lender to see if there is a type of financing that you qualify for.
When a property is being purchased as an investment and not a primary residence, the lender will usually need a larger down payment and the interest rate will also typically be higher, just so you know.
As a home investor you can use a real estate agent to help you find properties to consider. The agent will give information on real estate trends, fair market value of properties, leads on properties that are good deals, and up-to-date lists of HUD, bank owned, and short sales properties.
With a Realtor® in your corner, they will also prepare and handle all the paperwork, contracts, and disclosures. He or she will also manage communication between all the parties involved in the transaction. The real estate agent’s role could be invaluable to the home investor. To find the right agent for you, interview several real estate agents to discover the one who is willing to help you and provide assistance. When buying properties the commission is paid by the seller, so it doesn’t cost you, the investor, any extra cash outlay.
It would be really helpful if the Real Estate Agent you choose has personally purchased investment properties. Makes sense that they would have a better understanding of the ins and outs of investing, right? You’d be surprised how many people shy away from an agent with that type of knowledge because they’re afraid their agent will keep all the best properties for themselves. If you are lucky enough to find such a Realtor®, don’t let that thought enter your head. Not many people can buy every good deal that comes along, so having someone with investment knowledge would be a huge plus.
If you’re on a mission and plan on buying multiple investment properties, you should consider getting a real estate license. Not only will you save by earning the commission on your purchases, but you might also be able to deduct your investment expenses since investing is now part of your business. Always contact an accountant and/or attorney, however, for specific tax and legal advice.
Choosing the right location to buy is critical. Look out for locations that don’t suit your use of the property. If you’re buying a house to rent make sure rentals are allowed and the area supports the rent you need to get to make your investment profitable.
This is where an agent comes in handy again. A good real estate agent knows what’s happening in their town and where the “hot spots” are. Don’t look at a house for sale without considering the surroundings very carefully. The old adage of location, location, location is also true as it translates into dollars for the investor.
When investing in real estate, be crystal-clear as to the cost of any and all repairs and upgrades that you’ll need to do to the property inside and out. Also, don’t forget the maintenance. Investors are usually great at costing-out the upfront expenses, like repairs, but can sometimes be short-sighted when it comes to the long haul drain of routine maintenance. The uninformed investor may overlook this area, underestimating theses costs, and end up losing money instead of seeing a positive return on the investment. Repairs and maintenance to consider before investing include, but are not limited to the following:
- Roof condition
- Structural condition
- Foundation condition
- Heating and air conditioning unit issues
- Plumbing issues
- Grounds condition and drainage issues
- Windows and doors condition
- Electrical fixtures and wiring condition
- Bathroom and kitchen fixtures condition
That should give you enough to think about if you’re just starting out in real estate investing. Do your research, get some help and proceed with caution because real estate investing is NOT without risk, but I don’t know of any investments that are–do you?