Learning how to invest in real estate is a smart move for almost anyone. Not only can real estate help round out your investment portfolio, but owning rental homes can also teach you some very important financial lessons that will help you down the line.
What this means is that almost everyone can benefit from stepping into the world of real estate investment. That’s why we created this guide to teach you what you need to know about starting up your own real estate investment plan in just 4 simple steps!
Investing in real estate is a great way to make passive income, but it doesn’t come without costs. If you are making the right decisions with your rental property, the revenue that you bring in will outweigh these costs. However, it’s still important to know what you are getting into upfront!
Here are some of the major costs associated with buying and owning a rental property:
If you want to rent out a property, you need to buy it first. Luckily, it’s not too hard to learn how to get a mortgage in 2021 — the biggest obstacle is figuring out which lending option is right for you!
In general, there are a few factors that go into how much your mortgage is going to cost per month, including:
So, with so many factors playing in, how are you supposed to know what your monthly mortgage payments are? Well, you can use an online mortgage calculator to get a general idea. The best method, however, is to work with a real estate agent and a local lender who can help you work out all of your financing details.
With a new property comes new property taxes — and your investment home is no exception. When you are calculating how much your monthly expenses are going to be, make sure that you don’t forget about the taxes that you will be paying on the investment home.
As a landlord, you are responsible for the upkeep and maintenance of your investment property. Depending on the age, condition, and location of the home, these repair costs could vary greatly. When working with a real estate agent to find the right investment property, make sure that you have a frank conversation about expected costs for repairs, renovation projects, and home warranties.
Other fees that will affect your monthly expenditures include homeowners insurance, as well as Homeowner Association or Condominium Association fees. Each property you look at in your search for an investment home will be slightly different. So make sure that you are working with an agent and lender who can give you a clear picture of your monthly costs!
On that note…
In fast-moving markets like Washington DC’s hot neighborhoods, finding the right home can be hard. When you are looking for somewhere to live, you likely have a set of wants and needs for a house — this can actually make it easier to find the right house.
But when you are trying to invest in real estate, this is not the case! Learning what makes a home attractive to renters is important if you want to make money as a landlord. It also takes a lot of experience to learn this information. Luckily, you don’t have to figure it out on your own!
One of the most important parts of investing in real estate is finding real estate partners who can help you out. At the bare minimum, you should make sure that you have a great local agent on your side. So if you are investing in Washington DC or the surrounding area, this means that you need the best real estate team around — the Keri Shull Team — to support you!
Depending on what type of home you are planning to purchase as an investment, you might want to find some other partners, too. Consider speaking with local real estate developers (our favorite developer in DC is HyperFast Development) and other local landlords to get a sense of the market!
While this may seem like a straightforward step, it can actually be the most stressful aspect of investing in real estate if you approach it the wrong way. You see, not every home is suited to be an investment. And if you end up with the wrong home, then you could take a huge hit, financially!
That’s why it’s so important to make sure that you purchase the right property when preparing to invest. Here are some of the big factors that determine whether a home is a smart investment for you:
Unfortunately, finding a good home to invest in takes time.
Fortunately, you don’t have to spend that time yourself! If you work with a great real estate agent — one who is well-versed in your local market — then you can let them take care of the heavy lifting when it comes to finding an investment property.
So, you found the perfect home.
You put in a great offer and won, despite not being the highest bidder. Everything is going according to plan — what now?
Well, the point of investing in real estate is to make money. And as a landlord, you can’t make money without getting tenants into the home. If no one is renting out your investment property, it is just a big, fat money sink.
That means that you need to learn how to market your rental home online! There are services where you can host information about your rental, and they will share the property with potential tenants — for a fee, of course. However, this route can take a long time, and it’s difficult to properly vet the tenants that you attract. Because of this, we would recommend a different path.
If you’ve followed our advice so far, then you already know the importance of having a good real estate agent. Well, this is another step where they will come in handy!
At the Keri Shull Team, we are experts at marketing homes to the right tenant. Not only do we use cutting-edge technology to match people with the right home, but we also have a huge network of buyers and renters in our database that are looking for somewhere to live.
Of course, there’s more than 1 way to make money when investing in real estate. Besides renting out a home to tenants, here are some other popular ways to invest in real estate.
What is a Real Estate Investment Trust (REIT)? REITs are similar to mutual funds in that you invest your money with a corporation, rather than in a physical product or property. However, unlike mutual funds, REITs make their money by owning and operating pieces of real estate.
Pros to investing in REITs: REITs can help diversify your portfolio and require very little management on your part.
Cons to investing in REITs: Among real estate investments, REITs can carry a lot of risk.
That’s right, this isn’t just a popular genre of real estate television programming — flipping homes is a legitimate investment strategy in its own right! As you probably know, flipping houses is when you purchase a property that is either in poor condition or of a lower home value than its neighbors — then, you fix it up, make it appealing to buyers, and sell it for a profit! As long as you avoid home flipping mistakes, this can be a great investment opportunity.
Pros to Flipping Homes: There are a lot of resources out there to help you learn how to flip homes, and you don’t have to worry as much about the upkeep of the home or any issues with tenants.
Cons to Flipping Homes: Flipping a house requires a lot of up-front expenses. Furthermore, your investment usually pays out in a lump sum, rather than the stream of passive income that accompanies renting out a house.
Getting started as a real estate investor can be stressful. There is a lot to learn and a lot on the line — but luckily, you aren’t in this alone!
At the Keri Shull Team, we are committed to teaching you how you can make the real estate market work to your advantage. Just one way we can do that is by helping you with all 4 of these investment steps!
Are you interested in learning more about how the Keri Shull Team (the #1 real estate team in the Washington DC area) can teach you how to invest in real estate? Just contact the Keri Shull Team or click here to schedule an appointment with one of our market experts!