How to Start Investing in Real Estate

During the boom, real estate investing was the path to “quick riches.” Even though the market is still recovering – and is flat in many areas – it does not mean you should overlook investments in real estate as a wealth-building vehicle. Yet, if you want to avoid the investment sins of those who invested before you, you need to do a little homework.

Property evaluation – Goals and math

Consider your real estate abilities, as well as the time you have to invest in managing your properties before jumping into the real estate investment world headfirst. If you are a novice investor, find a more seasoned pro to take you under his wing and teach you the ropes.

Once you have defined a starting point, learn the evaluation techniques needed to locate (and not overpay for) a suitable property. For this, you will need to learn a little “math” in order to determine the financial viability of a property, and how to compare different properties.

Understand your profit margin

Real estate investments and cash flow should go together like peanut butter and jelly, but there are other benefits to owning real estate as an investment that can impact your selection of properties. Consider how much money you are willing to invest, and remember that you should never invest more money than what you are prepared to lose. Regardless, figure out the different scenarios and come up with different profit margins for each.

For example, some properties might yield a higher profit margin if you rent them out for a year and sell them down the line. Others might be a clear buy and flip opportunity. Before you invest, figure out your margin.

Know how the mortgage works for, or against you

Real estate investors will typically avoid taking out a traditional note on a house, it makes the math far more complicated. Instead, investors will use cash or fund the investment using a hard money loan. However, with any loan, comes interest and fees. Real estate investors make a point of calculating those into their profit margin equations. Make sure to deduct for property taxes, insurance, and interest.

Ideally, you can build a real estate empire on the back of a few thousand dollars, if you make the right investing moves. However, since real estate investing is largely trial and error, it’s important to have a mentor along the way if you want to meet with success. You can find some great (and free) suggestions on how to do this via the Lifestyles Unlimited website. Invest wisely today, reap the benefits tomorrow.