Real estate investing can be a fulfilling adventure. You are not only creating and directing your future but fulfilling your passions. If you are a newbie at investing and especially real estate, take a look at these tips to assist you in your quest. When I purchased my first investment, I had no idea what I was doing. I felt like I was over my head. There was no one to assist me or mentor me so that I make the right decisions. Today times are changing. There is a wealth of information on anything we want to do now. We no longer have to go at it alone. That’s why I decided to sit down and write this post on real estate investing tips for beginners.
Do your homework.
You wont know it all when you start. Research is the key. Take the time to research all you can. If you want to invest in the mid-west, then read up on the sales and comps in the area. Are there college towns in your desired location? Ask questions and I mean many questions. You can never be armed with too much knowledge.
Read all you can on investing.
This goes hand in hand with doing your homework and researching. Find books on investing and how to build from ground up. Seek out other investors who may have awesome books or reads to suggest to you as it helped them.
Don’t be afraid to step out.
Often times we are our own limitation. Don’t get caught up in saying what you cant do. Know what you can do and are capable of doing. Be okay with stepping out of your comfort zone. The craziest idea is one that was never tried. Go ahead you can do this. Fear is nothing but an unpleasant emotion caused by the belief that someone or something is dangerous, likely to cause pain, or a threat. What pain can be caused by success?
Be dedicated and consistent.
If you want to start investing, you have to be consistent and dedicated. Set your goals. Create mini goals within each main goal. Set timelines for each goal. As you accomplish each one, celebrate. Pat yourself on the back because you are investing for your future. Stay the course. There will be bumps in the road. Some goals will need to be reassessed. Reassessing does not mean failure. It means you are acknowledging what hasn’t worked and redirecting to ensure everything else does work.
Learn basic real estate investing terms.
Below are 8 most common investing terms and definitions and is a cornerstone of real estate investing tips for beginners:
- Buyer’s Agent vs. Listing Agent. There are usually two agents involved when you buy a home; the “buyer’s agent,” who represents you, and the “listing agent,” who represents the home seller.
- Ask: This is the lowest price an owner is willing to accept for an asset.
- Fixed Rate vs. Adjustable Rate Mortgages. Conventional loans include “fixed rate” and “adjustable rate” mortgages. A fixed rate mortgage has a predetermined interest rate throughout the life of the loan; the most common are for 30 years. An adjustable rate mortgage has a variable interest rate; the most common are for 5, 7, or 10 years.
- Pre-approval Letter. Before you apply for a mortgage or even start looking for a home, you should get a pre-approval letter from the bank, which is an estimate of how much they’ll lend you. This letter will help you determine what you can afford, and ensures home sellers that you will be able to get a loan when needed.
- Inspection. After you’ve made an offer on a home, you’ll need to schedule an inspection. The inspector will go through every nook and cranny, and review things like the plumbing, electrical, foundation, walls, heating, and appliances.
- Appraisal When you apply for a mortgage, your lender will require an appraisal of the home you want to buy.
- Offers and Contracts Once you find the right home, you’ll make an offer on the property with the help of an agent or attorney. If the seller counters your original offer, it’s usually because they want more money or a faster timeline for closing the deal, at which point you’ll have to negotiate.
- Closing Costs Be prepared to pay a lot of fees when you purchase a home. Typically, closing costs will amount to 2-5% of the purchase price of the home, and that doesn’t include the down payment. Common fees include excise tax, loan-processing costs and title insurance.
Decide your limits.
Do you know how much you can spend? What about how much you can afford? One cannot look at $100,000 properties when they have a limit of $25,000. Do not waste your time and efforts on researching investments that are out of your reach. Know your limits and know your market.
Plan your long term goals.
Are you investing to hold for the future? To flip and make money? What do you plan on doing with the investment once you acquire? Those are important questions you need to answer prior to starting the venture. Knowing what you will do with it down the road will help you plan and ensure you get the right investment to meet your long term goal.
Treat it as a business.
This can’t be a more important point. Treat it as a business. Everything you do in regards to your investment is applicable to the business. Keep all records. Download a mileage app to help you track the mileage when working on your business. Remember to keep your records for seven years. By treating as a business, it will work for you and create reduced tax liabilities if structured correctly.
If you read my posts Do you have a financial safety net? then you understand the need to create something for the future which also includes real estate. The post on Finance Moves You Should be Making in your 40s gives are unique take on not being afraid and stepping out of your comfort zoned to create the life you want including investing after 40. Read the posts to get inspiration!