Real estate investing has become a popular option for new investors or prospects who are looking to get their feet wet in the real estate industry. For newcomers, it can be challenging to make the correct investments that require the least amount of capital while generating the most amount of revenue and profit. The most popular form of real estate investing involves single-family properties. There are many benefits associated with single-family real estate, including consistent income, tax leniencies, and the equity/value of your property increasing while your payments decrease. What are some strategies you should use if you’re investing for the first time in single-family real estate?
Review your finances:
You may want to first understand what size of investment you can afford. Nothing will help you get off on the wrong track early more than taking on more than you can handle! There are plenty of books and sites online where you can research various strategies and models to learn ahead of time what may make the most sense for you. There are a lot of various expenses some of which are recurring and others that are, “one-time” including obvious line items such as monthly debt payments, taxes and insurance, as well as others like vacancy, “turn-cost” when a tenant moves out and on-going maintenance. I recommend analyzing various modeling prior to even beginning to look for an investment property so that you are well aware of what type of unit with what type of expenses you ideally would like to target.
Set a plan:
Now that the numbers are taken care of, the next step is to set a plan over the next several years in terms of what you expect with your rental property. So if you created a model that works for you, now you are creating a business strategy for this investment plan. It is important to research rental properties in the area you are targeting prior to pulling the trigger to add units that meet your model’s return on investment (ROI). I recommend driving the streets in the area you find most appealing, even walking them, at various times of the day to start to get a “feel” for the neighborhood and its inhabitants. This will help your confidence and over time should assist in your overall knowledge of neighborhoods so you can get a real feel for opportunities that come up in the future giving you the ability to move quickly should you have all your finances in order.
Don’t take a huge leap of faith:
One mistake often made in single-family real estate investing for new investors is putting their efforts into a property that isn’t as fruitful as it seems or believing they have to buy an absorbent amount of properties to gain a profit. The former usually is the result of a lack of due diligence on the front end. The former generally comes with early success and then the excitement of wanting to be big or have more prior to really knowing what to do and this is a lure that often leads to big mistakes that are exposed later many in the form of cash-flow or lack thereof. The old addage, “slow and steady wins the race” rings true here. So does another beauty that I often share with folks just starting out, “Crawl, Walk, Run”. Stepping into investing whether it’s real estate or not is challenging in of itself, where pushing to grow too quickly often leads to making costly mistakes so be careful and take your time. “Rome was not built in a day”!