There are a number of different ways in which you’re able to define investing in real estate. The gist of it is that the main goal is to put money to work today and allow it to increase so that you have more money in the future. The “return” – or profit – that you make on your real estate investments needs to be enough for you to cover the taxes you pay, the risk you take and the overall costs of owning the real estate investment. These costs can include insurance, regular maintenance, utilities and the like.
Investing in real estate can be very simple in that all it consists of is buying properties, avoiding bankruptcy and generating rent for the purpose of buying even more properties. The problem is that the fact that it’s simple doesn’t mean it’s easy; the consequences of making even the slightest mistake can result in anything from minor inconveniences to major disasters. Worst-case scenario, you could even end up being completely broke. To prevent that from happening, here are some ways you can start your real estate investments.
Renting Out Your Home
This is where the term “accidental landlord” comes in. You’ve probably heard of it – it’s the situation in which someone lives in one home, then moves, and then rents out their old home. The “accidental” in accidental landlord comes from the fact that such a person never really planned to be a landlord. But, they become one once they get their hands on a new home.
The thing is, you need to plan this strategy in advance if you’re looking to make it work. This means focusing on getting your hands on a home in a neighborhood that has great rents that are actually higher than the cost of the mortgage combined with all other expenses. When the time comes to move into a better home, all you do is rent out the old one and voila – you’re able to refer to yourself as a real estate investor.
Partnering With Other Investors
If you’re looking to add real estate to your portfolio but aren’t really interested in learning all the details involved in investing, you should consider working with other investors. The thing about great investors is, they’re always on the lookout for partners on various deals because they’re very good on finding lucrative deals. This because good investors are typically always out of cash because deals cost money. Partnering is how investors complete more deals; the best way to increase the number of deals and amount of money everyone makes is to simply find more partners.
This strategy is relatively similar to renting out your home, but with some important differences. Your main goal when using this strategy is to get your hands on a livable home - but one that requires a lot of work. The sort of work you’re looking for should include building an addition, finishing an attic or basement, adding hardwood floors or maybe upgrading the kitchen/bathrooms. Once you’ve found a livable property, you’ll need to estimate the ARV or “after repair value.” You can go about this by reviewing comparable sales or simply asking your real estate agent. Next, you’ll need to estimate your rehab budget. If you’ve got the skills, you can to the work yourself; otherwise, get a quote from a good contractor.
Crowdfunding is among the newest games in the investment real estate market in that it is an old concept, but a relatively new way to do deals. Crowdfunding is essentially a situation in which a group of investors are able to pool their money in a project and then share the profits. Crowdfunded deals can be advertised online, but keep in mind that they are limited to only accredited investors.
One of the biggest benefits of using crowdfunding platforms is that they help you weed out the bad deals by doing a lot of due diligence for you. The downside is that you have to pay some extra fees in order to benefit from that, in addition to the fact that it’s limited to only accredited investors. But, it’s still a great option for many.