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How to Get Started in Real Estate Investing

System - Thursday, September 12, 2019

Real estate investment is a great plan for generating some extra income, raising your net worth and building out a retirement plan for you and your family. Before you become a real estate mogul, you'll want to consider some things to prepare yourself for the world of real estate investing.

Save Up Some Money

First things first, you'll want to have some cash before you start investing. This money isn't only for a down payment on a house, but also for improvements and regular maintenance. Nowadays, you can purchase a house with as little as 3.5% down (or even 0%) in some cases, as long as it is your primary residence. If you want to live in the house and rent it out to roommates, using a low/no-money down loan may be a good option for you. However, if you are wanting to create a property portfolio for your investment, you'll need to raise more money for a down payment. Often closer to 15% to 20% of the purchase price for a investment property.

Single-Family or Multi-Family?

The next thing you'll need to consider is the type of property that you want to invest in. The biggest question is whether to purchase a single-family or multi-family property. A single-family property will typically be cheaper and have tenants that stay longer, however, the profit margin for rent is typically lower in the Fort Leonard Wood area. A multi-family property, like an apartment building, will be more expensive and you will have higher tenant turnover, but they often have a higher profit margin because you have more tenants in one place. If you have enough money saved, you may be able to buy a few single-family properties and a multi-family property too, which would diversify your property portfolio, helping o mitigate risk. 

Should You Get a Fixer-Upper?

Many people want a great deal on a rental property, so they look for one that needs TLC and think that they can buy it for a low cost, renovate it, and have a higher profit on the other side. This isn't really case for many investors, and we recommend that you don't try to purchase a fixer-upper for your first investment -- unless you have renovation and construction experience. A better first purchase would be to buy an "ugly house," one that is structurally sound, but needs cosmetic repairs like paint, flooring and cabinets. Those are cheaper improvements that can help you secure a tenant more quickly.

Cash Flow vs. Appreciation

We talked a little earlier about the differences between multi-family and single-family investments, and it boils down to cash flow versus appreciation. If you are looking for a property that will bring in more profit annually, you will want a property with strong cash flow. These are typically multi-family units. If you are looking for a long-term investment that you may use as additional income in retirement, you will want a property that will appreciate. These properties are ones that you buy and hold for a long time, then sell at a profit.

Hire a Property Manager

The biggest recommendation we can offer is, "Don't go it alone!" You need to have a team of people that know the Fort Leonard Wood rental market and what to do as an investor in this area. If you are starting off as a real estate investor, don't try to manage find, buy, and manage properties yourself. Hire a property manager to do that for you. Especially if you are unfamiliar with the area, a quality, local property manager can tell you what to expect to get for income from a property before you even purchase. Give us a call today to see how we can help your real estate investment dreams a reality.