How To Get Into Real Estate

Introduction

Investing in the real estate business is always a good idea. It’s relatively stable, it offers a good income and it can be fun as well. But with everything, at first sight, starting is not easy.

You will have to know many things when you begin and you have to learn even more things while you are doing it. So, as support, feel free to read our quick overview of what it takes to get you into the world of real estate.

Preparations:

Get your financial situation in order

Everything has to start small so that it can grow bigger over time. So instead of reaching for the sky and trying to get that house immediately, you should start with something more realistic. For example, straighten out your financial situation. Pay your consumer debt, limit your credit card usage. Get a secured job, where you can be sure to be still employed in 12 or 36 months.

Start to put aside some savings for emergencies. If necessary, also take care of your retirement funds.

Acquire some capital

REIT

No matter where you live: Start investing in Real Estate Investment Trusts.

They are sold worldwide and guarantee good growth in your investments. That means that instead of owning an actual, single estate, you acquire shares of a real estate company, that makes money out of all kinds of estates; be it single homes, multi-family, or office buildings. That way, you make your first step into the sector, with a way lower entrance barrier, and with a much lower risk.

Also, these REITS serve as a great option to fund your investment, as other investments might want to co-fund your estate. That way you can lower costs and still have shares of that property.

Start saving money and go alone

You might not want to make use of REIT, for various reasons.

In that case, to go on with your plans, you should try to make some savings. Banks will ask you for something between 10% and 30% of the assets worth in cash so that they might lend you the rest. To acquire the needed sum asked for by the bank, you should be too creative.

Keep in mind that one day, you will have to pay it back together. Nevertheless, you should of course keep investing in funds and shares, but nothing too risky.

Remember: You are preparing to get into real estate, not to be a Hollywood stockbroker from the middle of the century.

Get to know the local market

As the next logical step, you should make yourself acquainted with the local market. As you are just making your first steps into real estate, you should be very careful and sensitive.

Try to invest in your own broader area, so you can always take care of everything yourself and have an eye on the situation. As a start, get to know the people you are living with:

• Are there more old people or young, more families or more singles, working-class or white-collar?
• And what you as an investor also want to know: how much money do they have?
• So, they move to your neighborhood only for a couple of years, or are most of them already native to the third generation?
• Further, what are the financial guidelines: what are the overall housing prices? How much do people pay for rent? What is the average income of your area?
• After you found out all the basics, you should try to dig deeper: what is the pricing history of your neighborhood? What changes happening both on a global and on a local scale might affect the market?

Also, do contact some experts: speak to real estate agents and long-term dwellers near the object in question.

Side note: stay reasonable

As soon as you are sure about the area in question, no need to lose your mind. You are still only at the start of your investment, and you still haven’t acquired anything. So, stay calm and don’t get yourself in any unserious businesses.

While you are doing your first steps with getting into real estate, you should keep on thinking conservative and don’t get involved in shady ways of financing or weird deals to finance your investments.

As a basic rule: remain skeptical, do everything according to the law, and don’t sign any contracts that your Grandma wouldn’t approve.

Ready to Start

Buy a first home

Now it is time for your first investment. As you are only starting, you will hardly be able to afford more than one apartment or a family home. But be careful: renting out a single-family home makes sense only if it generates more income than the costs you have. If your tenants pay less rent than you pay for mortgage, taxes, maintenance, and your dwelling, you will lose money.

Therefore, you should have a home where you don’t pay rent and invest in a first home with rising rent prices. As a result, the amount of money you make increases over time.

Keep on going

With your first investment, you are only half-way through. The most important thing now is that you keep on with your day-job and keep on working. Save more money, keep your home in shape.

Yet, your income may not be big, and much depends on your lifestyle. That’s why so many tips and tricks are aimed at how you dwell on yourself. The most important thing is now that you know, that you are heading in the right direction!

Live and rent out

In case you don’t have any property for yourself yet, it can be very useful to acquire several homes at once. If you get to purchase a multi-home building somewhat it can be very useful if you live in one of these homes yourself and rent out the others.

This way, you save a lot on mortgage and insurance that you would otherwise have to pay both for your own and your tenants’ apartment. What’s more: if you live in one of your homes, you might not only get a tax break, but you can always have an eye on what’s going on in your property. And with rent steadily flowing in, the whole investment should pay for itself, as the other tenants’ rent should not only cover upkeep, maintenance, and insurance but also for the bank loan you took. Being an investor on his road to success, renting out a part of the property you live in yourself can be a great option.

Or if you are younger and willing to start early, you might even acquire a single large apartment on credit and rent out the bedrooms, while you use one of them themselves.

In either way, after you acquired some capital and paid off your bank loans, can either keep that starting object as a steady source of income (and as a sentimental reminder of your early days), or you sell each flat of your multi-home individually and move on to your next target.

Renovate and sell

Try to find an older object that needs some upgrades. If you happen to find a run-down estate in a generally good neighborhood, it is your lucky day. Your first home will already provide security for the bank because the buying price should be quite low. If you see potential in that object, try to go get it and have it renovated.

Of course, you should keep in mind some guidelines, when repairing. So, if your fixer-upper is located somewhere in a suburb and qualifies as a first home for a young family, don’t invest too much in the renovation. You will just be pushing costs, making it unaffordable for most of your target audience.

But when your object is located in a wealthy or upcoming area, just happening to be rundown or neglected, do as much as possible. Nothing can be good enough for the first tenants of your factory-turned-loft-apartments, so put some love in it.

See our text on Full House Renovation for further guidance on how to bring a fixer-upper back to life!

Get a property manager

At last, you will need a property manager to become successful.

While at first, you will have to do their work as well in addition to yours, they will come out very useful later. He/she is the busy bee, without whom you cannot succeed.

He/she will take care of the daily routine of upkeeping a house or an estate:

• Being on the line for tenants
• Saying goodbye to old tenants and welcoming new ones
• Coordinating craftsmen
• Dealing with local authorities
• Seeing through electricity, water, and insurance bills
• Managing repair and renovation
• And many more

There are many reasons why you should be careful when picking a property manager. A bad one may not spend enough time caring about your property, behave badly towards tenants, not choose the most talented, or even fake bills with authorities or service providers to live off your money.

But a good property manager weighs up itself in gold, so keep him/her, if you found someone worthy of your trust.

Conclusion

Getting into real estate is not rocket science. It is possible for most people to at least try, but only a few can make it in the business. That’s why you should not behave too risky at the start, as you don’t have that much to lose yet. Invest only what you can afford and aim at a target group not too different from yourself. That your first steps into real estate investment will be successful.