Real estate investing strategies vary from investor to investor. Some prefer the fast cash of Flipping, while others prefer the long view of Buy and Hold. Active investors make it a full time occupation, while passive investors may remain employed beyond real estate. There is no one way to invest in real estate. The important thing is to do your homework, and get started.
Why do real estate?
Many people feel they need to get into real estate because it is in the news, low interest rates, big rent increases, and everyone is doing it. Because everyone is doing it is not a reason to get in.
How to get started?
No matter who you are, or when you start, the first deal is always the most difficult. It’s new to you, and there is a lot to learn. Regardless of how much you think you know, you will quickly learn lessons you did not think about before investing in real estate.
Know the numbers!
If you think you are making money because the rent you are collecting is more than what you need to cover the mortgage, you may be upside down. Don’t forget to account for things like, taxes, repairs and vacancies.
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What strategy is right for you?
Flip for cash?
If you decide to flip, you can make some amazing returns fast. To be successful at flipping, you have to understand the marketplace! Know the most you can pay for the property and the most you can invest in the upgrades. If you mess this up, you can lose.
As a precaution, it is best to also know what your plan B is. If the market changes, how much can you rent the property for? Many investors start out as flippers, but end up as landlords because the market changed.
Buy and hold?
The marketplace is dynamic. It goes up and down. If your plan is long term, you may struggle in the beginning, but if you can weather the downs, you will come out ahead in the end. Some basic principles of wealth building through real estate investing:
- Loan principal reduction
- Property value appreciation
- Rent increase
- 1031 Exchange: The chance to upgrade your investment and leverage into larger properties will significantly increase your wealth.
In the beginning, it can be a struggle when you borrow every dollar you can, and cross your fingers that nothing breaks, and that everyone pays on time.
Overtime, the equity due to principal reduction and appreciation can be significant. But nothing grows if nothing starts.
In order to be successful, you have to do your homework. Talk to investors, learn the lingo, understand the market, and don’t do something because you fear that you will miss out.