Real estate investing often sounds like a scary idea, but there are many ways to invest in the real estate game and make money doing it. There are many things you need to know before getting started, such as the different types of loans used for real estate, how long an investment will take, what constitutes good appraisals, and other invaluable information.
Defining Real Estate Investing
The goal of real estate investing is to make money off of the properties that you invest in. In order for this process to be successful, it needs to be financially sound in the long-term. It also needs to retain value and provide a good return on your investment when the time comes to sell or you need additional capital.
How do you Get Started?
Real estate investing can get overwhelming, but it doesn’t have to be. By following a few simple steps and utilizing simple tools like property websites, you’re able to begin your real estate investment career with ease and a large degree of success. There are many different investments that you can make in real estate, including residential, commercial, and land. Each one has its own unique benefits, depending on the location of the property and the market in which it is located.
The first step when getting started with real estate investing is to find an agent to help you find the right types of properties that will fit your needs. Once you find a property, get an appraisal done to make sure that you’re getting a good deal. Make sure that the rents you can collect will cover the mortgage and expenses to maintain and keep the property. If everything seems to be in order, go ahead and purchase the property.
The Pros of Investing In Real Estate
The main pros of investing in real estate are the amount of money you can make when selling, the tax benefits, and the potential to make money from your investment in multiple ways. In addition, real estate investments help you diversify your investments.
The Cons of Investing In Real Estate
The main con of investing in real estate is that it generally takes a relatively large amount of cash to fund a property purchase. Additionally, it can be difficult to see profits in the short-term with real estate investments, so your money is likely tied up for a long period of time.
Making Money in Real Estate Investing
To make money with real estate investing, you have to have patience because it can take a long time before you see a profit with your investment. Fortunately, you can make money multiple ways including by being cash flow positive, by the renters paying down your mortgage, and by the price of the property appreciating. These methods combine to make real estate investing a powerful investment vehicle.
Types of Loans for Real Estate Investments
There are multiple types of loans you use for real estate investing including hard money, private, and government loans. These are each unique in the way you’re able to get them and how they can be used for investment.
A common type of loan for real estate investments is the hard money loan which is a loan that’s secured for a property with collateral. It is used to fund real estate transactions. In order to qualify for a hard money loan, you need to have substantial equity in your property and prove that you can repay the loans without causing any harm or damage resulting from the use of the asset as collateral.
Private loans are also referred to as alternative or non-conventional financing. These types of loans aren’t regulated by the federal government and are issued by private lenders who have the flexibility to offer larger loan amounts than what many banks offer.
Private mortgage companies are a great place to start when getting started with private loans for real estate investments.
Government loans for real estate investments can cover everything from the purchase of homes to commercial property. These loans are then repaid using your monthly rental income. The government will charge an interest rate and a monthly payment amount which is a percentage of your monthly rental income. One of the downsides to these types of loans is that you have to pay back more than you borrowed if you sell, let go, or terminate the lease on your property since it’s used as collateral for the loan.
What to Expect From a Typical Real Estate Investment
Real estate investments can take a long time to go through the process of payment, application, sale, and profit. It’s also different for each property you purchase. Be prepared for this roller coaster ride before you get started with investing in real estate.