Real estate investing is one of the most sure-fire ways to increase cash flow, even considering today’s market conditions. Although we may not be experiencing the housing market boom we saw from about 2000-2005, there are still countless ways to profit in this industry as an investor.
All it takes is a little information and knowledge.
A January 9, 2007 article by David Crook of The Wall Street Journal Online, “Post housing bubble, property still pays,” discusses the different steps to becoming a real estate investor.
“So you think there's still a buck to be made in real estate? You're right. There's plenty of money to be made because everyone still has to live somewhere. And everyone has to work somewhere. And everyone has to shop somewhere. And someone has to provide the space.”
“That's where the real-estate investor comes in -- making money by providing one of life's necessities. And just about anyone can be a real-estate investor. The capital requirements are quite minimal, and there are comparatively few legal restrictions on how you operate.”
The first thing that a potential real estate investor needs to look into is where they are going to get the money necessary to start such a venture. The first step to this is finding a good lender.
Many people are under the misconception that you need a lot of cash, which is not necessarily true.
“You can get good quality loans on buildings with up to four apartments under the same easy-lending terms that you can use to buy any residential property.”
“A lender will allow you to include the rental income along with your salary when you compute whether you can afford the loan. Try to keep the basic payment -- called ‘PITI’ for principal, interest, taxes, insurance -- to 25% or less of your before-tax income, including the rental income.”
You definitely do not want to get into something you can not afford in the long run, especially if this is your first investment property.
The most important thing you can do in the beginning of your journey is to research, research, research! Read as many books you can on the subject and get to know as many other investors as you can.
Building a network is a big part of succeeding in this industry.
“You need to develop a network of real-estate professionals, people who can help you acquire properties, because you are unlikely to find the best places just scanning newspaper or Web listings all alone.”
“One place you might look for contacts is in real-estate class. While certainly not required of real-estate investors, a real-estate license doesn't hurt. It helps to establish you as a professional, which has distinct tax advantages, and it lets you negotiate as a professional, which can result in sales-commission savings for you.”
Always be aware of real estate schemes (which are quite common these days) that make promises of getting rich in a matter of days. All in all, do your homework and when you find a property that is right for you, make that leap!
By: Groshan Fabiola