It all sounds easy; A monthly cash flow generated by renting out real estate. You can quit your job and live the life you always wanted. But not so quick. What sounds simple in theory is not as simple in reality. It all needs careful preparation and investigation. Careful planning is crucial. In this article, you will read 3 practical first steps for who wants to become a real estate investor.
A property offers many advantages, but the purchase of the rental property needs to be considered carefully. After all, you will be making a decision with a large financial impact – the right strategy is vital. If you consider the following steps, there is nothing standing in the way of your first property investment.
Step 1: save money
The more money you can save, the easier the later financing of the property will be. You should therefore start saving as early as possible and also improve your creditworthiness.
While you save capital on the purchase of your first property, you can of course invest the money you have accumulated. However, make sure that your assets will be available in time for purchase. Long-term investments are therefore less suitable.
Step 2: plan financing
Before you actually start looking for a property, you need to be clear about the size of the investment you want or can invest in. Will you start small with a one- or two-room apartment or do you start directly with an apartment building?
When talking to a bank advisor, you will know the loan amount you can get. Together with the money you have saved this results in the upper limit for your investment, which enables you to narrow down your property search.
When calculating, take into consideration additional costs: real estate transfer tax, notary and estate agent fees.
Step 3: object selection
Knowing your upper limit, you will now be able to decide in what type of real estate you like to invest in. You can now study a few scenarios to figure out
- what type of real estate (house or apartments…)
- in which location
- long or short-term rentals
you should invest in to bring you the most profit.
Your time as a real estate investor
Don’t forget to take into consideration your own time that you need to spend regularly to look after your real estate investments.
Although short-term holiday rentals can be a lot more profitable, they will also need more of your attention and time.
Correctly estimate your time
It is not so easy to correct mistakes when buying a property – so make sure to take your time before you decide to buy a certain property.
And even after buying, be aware that you still need to invest time: be it to make accounts, organising repairs and renovations, dealing with your tenants… There will be always something that will need your attention.
A competitive market for a real estate investor
Generally, the real estate market has been on the upswing for several years. If you want to be a real estate investor today, you are therefore dealing with a competitive market.
A big advantage of real estate is the opportunity to generate a cash flow month after month. With rented houses and apartments, you can still make a profit after covering all costs and already collect capital for the purchase of the next real estate.
You have not much money available for your investment? Why not start small. Have a look at www.propertyunder20k.com to find cheap real estate for sale.