How to Invest in Real Estate

How to Invest in Real Estate

How to Invest in Real Estate

Purchasing a rental property or investing in Wilmington, North Carolina real estate can sound like a great idea, especially when friends and family are nearby and the beer or wine starts flowing (see my article about investing in real estate).  Even for a seasoned real estate investor, however, the complexity of the topic and the sheer amount of steps involved can make it seem like an intimidating prospect.  With that in mind, here are some insights and strategies to help you chart a path to success and avoid some of the most common mistakes.

Before you become an active real estate investor, it is a good idea to come up with some honest answers to the questions below:

·         Do I have the funds to put 15 to 20 percent down on an investment property?  If you are interested in buying an investment property, you will have to make a down payment of approximately 15 to 20 percent in most cases.

·         Do I have the income to pay for two mortgages?  At some point, most landlords have to face the unfortunate reality that renters don’t pay sometimes.  Planning for vacancies and missed payments is essential if you want to be a successful real estate investor. 

·         How much confidence do I have about my job security?  Before you can become a full-time real estate investor, you will need to have a job and a stable monthly income.  For most people, this is necessary to secure financing and to cover expenses before multiple properties are providing monthly income.  Many have the long-term goal of becoming a full-time real estate investor who is only responsible for managing rental properties, but financial constraints often prevent this from happening.  In the vast majority of situations, most people are only able to leave their jobs behind after they have numerous successful purchases and sales under their belt.  

Even if purchasing your first Wilmington, North Carolina investment property is currently outside the realm of possibility for you, there may still be a way to reap the rewards of investing in real estate.  A great place to start could be with a Real Estate Investment Trust (REIT).  Compared to other forms of real estate investing, a REIT has a relatively low price of admission.  

Similar to investing in a mutual fund, an investor purchases shares of a portfolio of properties when buying into a REIT.  One of the biggest advantages for the investor is that of liquidity.  It can take can take months to sell a rental home or commercial property, however it is possible to sell shares of a REIT by clicking a mouse.

For those who believe they are ready to become active real estate investors, the next phase involves building relationships with local real estate professionals.  Industry professionals such as mortgage brokers, Realtors and property managers who are local have a vested interest in the community, which means they will apply a significant amount of time and effort to help you succeed.

Of course, it is important to find a local mortgage broker before you start looking for your first rental property.  This can provide you with an understanding of what you can afford, so you can avoid the disappointment that comes from finding the perfect property and realizing it is out of your budget.

Choosing a dedicated and knowledgeable Realtor is also essential.  Who wants to spend countless hours searching the Internet if it isn’t necessary?  To help you create an investment strategy that is the best fit for your individual goals, I will help you identify your specific needs and eliminate many homes that don’t match your criteria, saving hours of your time in the process.

Finally, when a property has been located and a purchase price has been negotiated, the process can truly begin.  At this point it will be necessary to ask a few more difficult questions:  Will I be able to manage a rental property?   Do I have the skills, knowledge and personality to achieve that goal? 

It could be in your best interest to hire a professional management company if you don’t think that you have the personality type to manage problems, handle issues and deal with tenants.  To be successful as a property manager, it takes finesse and a thorough knowledge of the real estate laws that pertain to rental properties, as well as a talent for being professional in a variety of situations. 

If you are considering investing in real estate, have questions about this article or would like a referral to a property management company, give me a call at 858-692-5120 or email frittscausby@gmail.com.