Investing in real estate is similar to investing in the stock market. Most of the time you’re not going to buy a stock or a property on a whim. If you really want to make a real estate investment with your time, you’ll have to be willing to put in the work.
How to Invest
There are many different ways to invest in real estate. You can focus on flipping houses, renting out properties or you could invest in real estate investment trusts (REITs). Remember that if you plan on flipping the property or renting out the space, you want to have enough funds for your mortgage payments, regular upkeep, and a little extra saved up for unexpected situations. REITs are a lot like mutual funds in that you invest in shares of a larger company. That company takes part in the bigger picture of purchasing, managing and reselling properties which can create a flow of income for you. Each REIT is different in the properties it specializes in and the methods of its return on investment. Research various REITs and what industry experts like Paul Daneshrad say about the best practices of investment firms.
When to Invest
While there are good times and bad times to invest in real estate, the main factor in the equation is you. Are you in a good place financially to receive loan interest payments and consistently make payments on your mortgage? If you plan on flipping the house, do you have time in your schedule to finish renovations in a timely manner? If your personal situation is in check, it’s time to review the market in the desired area. Evaluate average interest rates, recent selling prices and average days on the market. If you’re considering an REIT, look at their recent and upcoming projects to understand the potential risk and gain.
Where to Invest
Whether you are looking to invest near home or across the country, it’s good to do some research about the area beforehand. Check up on local job offerings, city-wide projects and population growth in recent years. You’ll also want to do a bit of research about cities in the area you are looking at. There are online studies about cities with the best markets for flipping or renting. Figure out how you’re going to invest to help you decide where is the best place to do that.
If you’re looking to start investing in real estate, this is a great place to begin. Understand your how, when and where and you’ll be there in no time.