Real Estate Investment in 5 Easy Steps

There’s no question that real estate is one of the most lucrative markets to invest in. Property values are increasing across most parts of the United States, so a property that you buy today could be worth far more in just five or ten years.

Real estate is a little more complicated to invest in stocks, but it can be much more financially rewarding. If you’re new to real estate investment, here are 4 steps you need to take to get started.

1. Scope out the Market

The first thing you’ll want to do is find a house for sale that might make a good investment property. If you’re a first-time homebuyer or real estate investor, you should try and look for a home that’s not too expensive. New investors may not have a lot of capital to buy a more expensive home, so that’s why it’s better to start at a low price.

There are lots of places that have homes for sale—where should you choose to buy? Keep in mind that you want to make a profit. It’s best to buy a home somewhere where either the rent price or property value is going to increase. You need to make enough money on the home to pay the mortgage and have a little extra to pocket. A home listings website is one of the most important tools you can use.

Look for neighborhoods that are due for redevelopment. These neighborhoods usually have lower housing costs so you can buy at a better price, and then the value will increase after the redevelopment happens. There are plenty of low-cost neighborhoods that have very affordable houses, but you might not be able to make much money on them if the whole neighborhood doesn’t ultimately increase in value.

2. Get (the Right) Financing

When you’ve selected a suitable investment property to buy, you’ll need to get financing to buy it. It’s important that you get the right type of financing, which will depend on your investment strategy.

If you plan on keeping the home, renting it out to tenants for a while, and then selling it for greater profit, you should do okay seeking a standard 30-year mortgage on the property. But you’ll need a different kind of financing method if you plan on doing a fix-and-flip.

A fix-and-flip is when you buy a run-down for a lost cost, and then refurbish the house to raise its value a significant amount. Once the house has been refurbished, you’ll sell it as soon as possible for profit. Most financial institutions won’t give mortgage loans that are going to be paid off within 1 or 2 years, so you should seek out a hard money loan, instead. You can form a profitable real estate business all by doing fix-and-flips.

3. Boost the Property Value

If you bought a good investment property, then the property value will increase naturally over time and you’ll be able to make a lot of money when you decide to sell. But there are a few things you can do to boost the property value on your own. Be sure to fix any major maintenance issues, like faulty plumbing and AC. You might also consider repainting the house with a fresh coat of paint and perhaps with different colors. Remember, most people prefer their homes to be in neutral colors.

The yard can significantly affect a home’s value. If you’re unable to grow smooth grass, consider replacing it with an artificial lawn, and maybe consider adding a tree, flower garden, or plants.

If you’re a fix-and-flip investor, renovating the home will be a major part of the process. You can’t spend too much money on the refurbishment, or else you might not be able to make as much profit when you sell. Be sure to find contractors that offer the best services at the lowest possible price. You don’t need to turn a run-down property into luxury living—just make it desirable enough so that the value increases.

4. Sell or Rent

If you’re not selling your home right away, then you probably plan on renting it out to tenants so you can earn a monthly income on their rent. It’s a great way to make extra money and pay off the mortgage, but it also means that you’re going to assume the responsibilities of a landlord. That means that you’ll be responsible for handling all of your tenants maintenance requests—and for finding tenants.

Be sure to get a background check and credit report for landlords before you offer a lease to a tenant, and make sure you learn the legalities of that process. You can also hire a property management company to handle all issues concerning your tenants so you don’t have to.

That’s all it takes to get started in real estate investing! Just take these 4 steps and you’ll be investing in no time.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes.