Investing In Real Estate
You're thinking about starting to invest in real estate? Perhaps rental properties, fixing and flipping or vacation rentals / Air BNB properties. . .
How do you come across "a good deal"? What is even considered "a good deal"? What is the best time buy or sell investment properties? If you've asked yourself any of these questions, you're in the right spot!
Investing in real estate is something anyone can do, but not everyone does well. If you are licensed and in the industry day in and day out, it may come easier to you. If you are not, partner with a full-time agent who is a local expert on what is going on in your market. They can help you build your portfolio, whether that is starting with a few duplexes, single family homes or other investment properties.
Most people grow their portfolio over time, so don't be intimidated by getting started, it always takes one to get started. Another benefit of partnering with an agent that can help you look for and purchase investment property is leveraging their local lender contacts. For some projects maybe a commercial loan is more attractive and fits the purpose, for others, maybe a residential loan offers a lower interest rate and is available depending on your goals.
If you're purchasing an investment property in cash, there is more flexibility around the condition you're able to purchase. If you have the skillset or partnerships to rehab homes, the condition may not be much of a concern for you.
For example, if a home is in major disrepair with issues that may cause value / funding concerns, the seller and agent probably would agree the ideal buyer will need to purchase the property in cash for the transaction to go through. This may help the buyer leverage a more competitive offer price, given the lower number of cash buyers in the marketplace.
So, why do people invest in real estate? Historically, real estate is one of the few assets that appreciates (instead of depreciates). It is dependent on the market, economic conditions, and other factors that are outside of our direct control, but what industry isn't?
Depending on your strategy, it can be a great way to build recurring income while maintaining value and equity.
For example, let's say you purchase a single family rental property for $50,000 cash and put $10,000 into it. Your investment up front is $60,000. Let's say you're able to rent the unit at $700 / month for a year. That is $8,400 gross income and of that let's say you pay some in taxes and some on repairs, so you keep 75%, equaling $6,300. Let's say you hang on to this rental property for 10 years, assuming the same assumptions as above, you would have made $63,000 plus you decide to sell the rental for $65,000, totaling $128,000 in 10 years. That's a pretty great return in a decade.
Now that math was simplified to provide an example. There are far more factors that go into an investment purchase, but it's used as an illustration to explain the concept.
If investing in real estate sounds like something you'd be interested in, our team would love to help! Contact us to learn more!