Let’s face it real estate investment is a dream of most people, because its not only a fun and tangible way to invest but also it can have healthy and predictable returns. So how can you get into real estate investing for the first time, and how do you develop a real estate portfolio?
Real Estate Investing for Beginners
How you make your first investment will depend much upon what funds you have available to you, and what skills, you have.
If you have funds available and can get a mortgage as well and you have some house renovation skills then it makes sense to get into house flipping, which is all about buying houses, renovating them and then selling them.
If you have less cash available and are heavily reliant on lending money for your real estate investment, then your bets option is buy to let. You buy a property that doesn’t need much work, maybe a quick redecoration, and then you let it out. The income from the rental will cover your loan and provide a tidy property for reinvestment.
Dangers to Look Out for in Real Estate Investment
So that all sounds great, money to be made easily in house flipping and buy to let investment. Well actually there’s plenty of property investors who’ve fallen foul of a few mistakes that can put a swift sharp end to your investment dreams.
The first is property prices. There’s nothing worse than buying a property only to see it fall in value with the market during your ownership. Not only could this put you in negative equity with your lender, but it could wipe out your profit plus some of your own investment cash. The best way to avoid this situation is to be smart about the properties you invest in.
You have to do plenty of research on the property and the neighborhood before buying. Older properties which haven’t been renovated for decades could have multiple hidden issues which eat up your money, so make sure you have a survey first. When it comes to the neighborhood, make sure you know what the reputation is like, what maximum sale prices have been for that area, and what developments are planned for the area. A property that is going to be under the flight path of a new airport runway isn’t going to hold value, whereas a property in an area where local government investment is going into infrastructure and amenities is likely to increase naturally with the market.
Another danger which applies to buy to let properties is being too reliant on the rental income. At the beginning of your property ownership if there’s not already a tenant in, you may find that you go several months without income, and the same may happen at a later stage if one tenant leaves and you have to do some renovation work before securing a new tenant.
Property investment can be rewarding but you have to pick the right properties and don’t overstrain your finances.