How do I start investing in real estate?
Anyone can start investing in real estate with many methods which leads to real estate development and investment business. The best real estate investors earn millions of dollars from investing in numerous residential and commercial real estate properties, but it takes years to reach this level of affluence in this industry. The following are the methods you can implement to start investing in real estate.
Wholesaling
Real estate wholesaling is the investment method through which an individual, the ‘wholesaler,’ acquires a contract from the seller of the property and assigns that same contract to an end buyer. Wholesaling is the best short-term investment strategies and is a great way for individuals to break into the real estate investing industry. Any individual can start this method because It does not require significant capital to get started. Beginners can able to learn quickly about the real estate market as well as gain invaluable negotiation skills.
Before you strike your first deal, you need to know the markets you want to work in like the back of your hand. You’ve got to make sure you’re getting properties at a price desirable enough for a fix-and-flipper (including your profit). Successful wholesalers rely on large networks that take time to build. For every one deal or contract he or she secures, the wholesaler may have knocked on 100 doors or made 100 cold calls to potential sellers.
The amount of capital required for a wholesale deal varies. In some cases, you may be able to secure a property from a seller for no money down. Most of the time, a seller will want you to put down an earnest money deposit (EMD). This can be as little as $500 to show that you expect to get their property to the closing table.
Home Equity Line of credit (HELOC)
The best way to borrow money for a down payment on an investment property is to take out a home equity line of credit (HELOC) against your primary residence. It’s relatively affordable, it’s flexible, and if you have a lot of equity, you can borrow a lot of money!
Investors use a HELOC method to cover the initial down payment or the renovation costs when they buy a new property. After renovating, they then refinance to pull some cash back out and pay off their HELOC balance, and then go out and do it all over again.
HELOCs can be fixed-interest or variable, based on the prime rate. They typically have a 10-15 year draw period, during which borrowers can use the line of credit like a secured credit card. During this time, the borrower often only pays interest on the credit balance and does not have to pay any money toward the principal each month.
House Hack
House hacking is an effective real estate investment strategy when owning multi-family rental properties. House hacking means when you live in one of the multiple units of your investment property as your primary residence, and have renters from the other units pay your mortgage and expenses. It can also implement in single-family homes when the investor lives in the property, make improvements, and looks to resell within a couple of years. Renting out a basement, or an additional portion of your home can also be considered house hacking. This is a solid strategy for investors looking to do a quick fix-and-flip, or for investors looking to buy an owner-occupied multi-family property, such as a duplex, triplex.
The right way to invest will vary from one method to another and property to property. What’s important to note is how many options you have available and how to use them. After all, real estate investors are required to get creative from time to time.