Approximately 25% of all homes sold in the United States in 2021 were purchased by investors. And it's no wonder why investing in real estate has become so popular.
There are many reasons why so many people are flocking to real estate investing. For starters, it can be a great way to build wealth over time. It can also provide you with a steadier income stream than other types of investments, such as stocks and bonds.
If you're thinking about getting started in real estate investing, you should know a few things to ensure success. Below, we've outlined real estate investor tips to help you get started.
Why Invest in Real Estate?
Before we get into the tips, it's essential to understand why you should invest in real estate in the first place. After all, there are many different ways to make money, and risks are certainly involved with any type of investment.
The following are some of the reasons why investing in real estate can be a great idea:
One of the most significant advantages of investing in real estate is that it can be a very reliable investment. Unlike stocks and bonds, which can go up or down in value based on the whims of the market, real estate typically appreciates over time.
Of course, there are always exceptions, and there's no guarantee that your property will appreciate. But, in general, real estate values tend to go up over the long term. This makes it a much more predictable investment than other options.
Hedge Against Inflation
One of the big concerns for investors is inflation. This is when prices for goods and services rise over time, eating into the purchasing power of your investment.
Fortunately, real estate can be a great hedge against inflation. This is because as prices go up, so do rents. As a result, your rental income will likely increase along with inflation.
This can help you keep up with the rising cost of living and maintain the purchasing power of your investment.
Build Wealth and Equity
Another major benefit of real estate investing is that it can help you build wealth over time. This is because, as your property appreciates, you'll own more and more equity.
You can also build equity by making improvements to your property. As you add value to the property, your equity will increase.
You can eventually cash in on this equity by selling the property or taking out a home equity loan. This can give you a good lump sum of cash for any purpose, such as investing in other properties or taking care of other expenses.
10 Top Real Estate Investor Tips From Successful Investors
If you're considering getting started in real estate investing, educating yourself and understanding the risks involved is important. This will help you make informed decisions and avoid costly mistakes.
The following are ten tips from successful real estate investors that can help you get started.
Know The Rules
The first step to being a successful investor is to familiarize yourself with the rules and regulations that govern real estate investing in your area. These rules can vary significantly from one location to another, so it's important to know what you're getting into before you start buying properties.
A few basic rules that you'll need to be aware of: zoning regulations, building codes, landlord-tenant laws, and financing rules. Once you understand the basics, you'll be much better positioned to make money with your investments.
Keep in mind that the rules can change over time, so it's crucial to stay up-to-date. You don't want to inadvertently violate a rule and get fined or have to give up your property.
Know Your Upfront Costs
Another important tip to remember is to know your upfront costs. When you're buying a property, you'll need to pay a lot of expenses, such as the purchase price, closing costs, repair and renovation costs, and more.
It's essential to have a good understanding of all of these costs before you purchase a property to avoid being surprised later on.
You might also want to consider getting help from a financial advisor to make sure you're making the best decision for your situation.
Have a Budget and Timeline Ready
If you're a new investor, it's best that you reserve 50% of your budget. This is because when renovating properties, unexpected costs always pop up. From water damage to a faulty foundation, these things can eat into your budget quickly if you're not prepared for them.
Set a timeline for when you want to have the property rented out or sold. This will help you stay on track and make sure that you're not overspending on your renovation project.
Get familiar With Your Tax Laws
It's crucial for you to understand the tax implications of real estate investing before you get started. The last thing you want is to get in over your head and end up owing the government a lot of money.
It's a good idea to speak with a tax professional to better understand what you can and can't deduct. This way, you can ensure that you're taking advantage of all the tax breaks available to you.
Search for Deals in Emerging Neighborhoods
One of the best ways to find good deals on properties is to look in emerging neighborhoods. These are areas that are just beginning to gentrify, so you can get in on the ground floor and invest before prices rise.
Not only will you be able to find great deals, but you'll also be able to help improve the neighborhood and make a difference in the lives of the people who live there.
Research Crime Rates
Before you invest in a property, it's important to research the crime rates in the area. This is especially true if you're planning on renting out your property to tenants. No one wants to live in a high-crime area, so you'll need to ensure the neighborhood is safe before investing.
You can find crime statistics for most cities online or speak with the local police department to get more information.
Investors bought 24% of all single-family houses sold nationwide last year. The reason is that single-family homes are relatively easy to find, finance, and rent out. They're also less expensive than other types of properties, such as condos or townhomes.
We recommend researching and finding a single-family home in a good location that you can afford. Once you find a property, make sure to get a home inspection to ensure that there are no significant problems that need to be fixed.
Network With Local Investors
To succeed in real estate investing, it's important to network with other local investors. They can give you advice, share resources, and help you find deals on properties.
You can find other investors by attending local real estate investor meetings or online through forums and social media groups.
You Don’t Need to Start Big
One of the biggest mistakes new investors make is thinking they need to start big to be successful. This simply isn't true. You can find plenty of good deals on small properties, such as duplexes and triplexes.
Not only are these types of properties less expensive, but they're also easier to manage. So if you're just starting out, don't feel like you need to invest in a large property.
Get the Most Out of Your Investment
If you want to make the most out of your real estate investment, it's important to do your homework and understand the market. Know what you're looking for in a property, and don't be afraid to negotiate on price.
It's also a good idea to have a team of professionals, such as a real estate agent, lawyer, and accountant, to help you through the process. They can offer valuable advice and help you avoid making costly mistakes.
More and more people are turning to real estate investing to make money. It's because it can provide a good return on investment, it is relatively easy to get started, and there are many different ways to make money in real estate.
But as with any investment, there are risks involved. These real estate investor tips will help you minimize the risks and maximize your chances of success:
- Before investing in real estate, it's important to know the rules and regulations in your area to avoid any legal trouble.
- Know your upfront costs, have an emergency fund, and be prepared for the unexpected.
- Reserve 50% of your budget for unanticipated costs.
- Consider emerging neighborhoods and single-family homes when looking for a property to invest in.
- Network with local investors to get advice and resources.
- You don't need to start big—you can find plenty of good deals on small properties.
References to any investments or assets are for illustrative purposes only and do not constitute a recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any investments. Charts and graphs are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.