Becoming a real estate investor is a dream for many people, but most don't think it is possible without lots of extra cash. We believe that anyone can get into real estate investing, and you can turn it into a side business or retirement plan with the right steps. This post will cover some steps you should do before you even start looking for your first investment property.
1. Build an Emergency Fund
Every financial planner will tell you that you need to have an emergency fund set aside in case of, well, emergencies. This is something that everyone should do, no matter whether you want to be an investor or not. There are many thought about how much you should save, but we aren't financial planners, so we'll leave the advice to them.
2. Stick to a Budget
As an investor, you will have to be prepared for unexpected expenses. Sticking to a budget will help you be able to save the money you need for a down payment, house flipping or simple maintenance and repairs. To achieve financial goals, you'll need to cut out unnecessary spending in your life.
3. Pay Off Debt
One of the big factors that a lender will look at for approval on a house loan is your debt to income ratio. If you want to buy an investment property, it would be wise to lower your debt to income ratio, helping you get approved for more and possibly getting you a better interest rate.
4. Understand Goals and Priorities
Once you feel you're getting close to having enough for a down payment, you can start getting serious about what house you want to buy. On the way there, you should consider what you want to get out of investing. Do you some extra monthly income from apartments? Or money in your future retirement from a single family? Or are you considering fixing and flipping for a short term financial gain? Once you know what you want to get out of your investment, you will go into it smarter and more prepared.
5. Know the Basics of Real Estate
If you want to become a real estate investor, you don't have to do it alone. You should surround yourself with trusted real estate agents and property managers that can guide and advise you through the process. When investing, you'll need to know what a rental can potentially rent for, or what tenants want in a home, or where a problem might arise in a real estate transaction.
You can look online or read books to learn about real estate, and we recommend you do that if you want to be a serious investor (We've even compiled some resources to get you started.). You can also work with the best property management team in the area, who can help you get a great tenant that maintains your property and helps you reach your financial goals. So give us a call at (573) 336-4100!