You’ve battened down the hatches and decided to jump into the world of real estate investing. While the real estate market saw a major readjustment in the last decade, it is prime time now for real estate investors, with many great opportunities out there for the taking.
The first thing you have to understand is that embarking upon a real estate investment venture is a business, plain and simple. Therefore, you can’t afford costly errors made from emotional or impulsive judgments. Investing in real estate is fun, but you have to put in the research. Now for the rest of the advice.
Your credit history has everything to do with your chances of scoring a profit in real estate. While you might think simply getting the deal done for a quick flip, despite having numerous bad marks on your credit, is going to fly, it’s not. You need to be consistently working to improve your credit, and even the smallest blotches on your report make all the difference. This can affect the rate at which you receive a hard money loan if that’s the route you choose.
Why? Say you’re getting into the real estate game planning to flip houses. There is nothing wrong with that, but what happens when one of those houses doesn’t flip? Well, you’re stuck with paying the mortgage until it flips. You want good credit so that the interest rate isn’t high. Whether you rent it out or simply sell it months later for a nice profit, that interest rate can bite you if you have less than stellar credit.
Additionally, the better credit you have, the more leverage you’re going to have when investing in properties. Not only do you want to set up shop with the right credit, but you want an established bank and mortgage broker as well. And, if you plan to pay cash for the real estate purchases, you still need these two entities on your side for when you have to submit a “proof of funds.”
Networking with other real estate investors is also key. This gets you in on the deals and the details about real estate in certain areas. Also, while diversification can be important for sure, you also want to get to know certain markets really well and niche yourself out a little bit. The more you know about a certain market, the better off you are when trying to flip or market properties.
It’s also a good idea to have a real estate agent on your side. They will take commission from the sale, but you can have many more sales when you have a good agent working for you.
Another rule of thumb is to pay close attention to what type of return you’re going to get. In essence, what you want is at least a one percent return per month against the sales price. To get you really excited, with home prices having dropped, you’ll be able to get better than that on many of your real estate investment opportunities. So if you’re ready to jump in, by all means, but run your business efficiently and continue to network.