It is wise to consider investing in real estate. With this sudden surge in the buying market, an investor can make a serious return on his or her investment. Furthermore, when compared to stocks, a person will not see the day-to-day fluctuations that frustrate the stock trade investors.
Sadly, many new investors lose a lot of money when they do not understand the fundamentals of buying and selling homes. With this in mind, here is a short guide to real estate investing.
Find a Great Location
As is often said in real estate: location, location, location. When buying a place, you should consider looking at the best neighborhoods in relation to crime. In fact, when buying in a safe area, you can see a nice appreciation on your return as well.
At the same time, in some cases it is maybe more beneficial to purchase a lower-end home in a great place versus a nice house in a bad area. However, if the price is right, and the neighborhood isn’t, ensure there is a home security system installed for your family’s safety even if it is the home of your dreams. Remember, whether you plan to fix up a house or rent it out to tenants, you should consider the safety of the area before anything else.
Come Up With a Plan
All too often, a buyer will find a house, make an offer, and then grow frustrated with the process. No, instead, when buying a place, you should have a plan. Now, when making a plan and coming up with a strategy, you should define your long-term goals.
For example, some people will want to rent the house to tenants while others will want to fix it up and sell in the future. Simply put, by coming up with a viable long-term strategy, an investor can avoid a common pitfall of investing that plagues many.
Shop Around for a Mortgage
When it comes to a bid, as beginners get started, they want to make money fast — most will want to take the first offer on a home loan. This is unwise as some banks or credit unions will not offer good rates.
Instead, when buying a house, you should opt to shop around for the home loan. When doing so, you can cut thousands of dollars of interest payments off the life of the loan. Remember, banks compete for your business, and it is smart to look around as much as possible.
Do It Yourself
When owning property, you will have to deal with broken and decaying appliances and other home problems. To save money, you should opt to learn a little about fixing up houses and making small repairs. Otherwise, when receiving a repair bill, you will realize quickly that homeownership comes with a hidden cost that is hard to manage.
It is easy to fall in love with a place and make a huge offer. This is not financially smart as it is often hard to step back and wait to make a lower offer. This is common for new investors who do not want to miss out on the next big thing.
Instead, when looking at a place, a potential buyer should ask a lot of questions and opt to offer a lower price. At the same time, when looking for concessions such as the seller paying closing costs, you can save a lot of money with little effort.
With these five tips, a beginner homebuyer can make the right decisions and find a great deal on a real estate investment. Simply put, when you are prepared and understand the entire process, you can avoid the common problems that many face.
What other tips do you have for investing in real estate?
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him here and here.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.