Here are three simple guidelines that must be followed if you plan to succeed at real estate investing. It’s not everything, of course, but at the very least, you must be willing to commit to these things if you want to become a successful real estate investor.

Shall we get stared?

Acknowledge the Basics

Real estate investing involves acquisition, holding, and sale of rights in real property with the expectation of using cash inflows for potential future cash outflows and thereby generating a favorable rate of return on that investment.

More advantageous then stock investments (which usually require more investor equity) real estate investments offer the advantage to leverage a real estate property heavily. In other words, with an investment in real estate, you can use other people’s money to magnify your rate of return and control a much larger investment than would be possible otherwise. Moreover, with rental property, you can virtually use other people’s money to pay off your loan.

But aside from leverage, real estate investing provides other benefits to investors such as yields from annual after-tax cash flows, equity buildup through appreciation of the asset, and cash flow after tax upon sale. Plus, non-monetary returns such as pride of ownership, the security that you control ownership, and portfolio diversification.

Of course, capital is required, there are risks associated with investing in real estate, and real estate investment property can be management-intensive. Nonetheless, real estate investing is a source of wealth, and that should be enough motivation for us to want to get better at it. We buy houses in Charlotte

Understand the Elements of Return

Real estate is not purchased, held, or sold on emotion. Real estate investing is not a love affair; it’s about a return on investment. As such, prudent real estate investors always consider these four basic elements of return to determine the potential benefits of purchasing, holding on to, or selling an income property investment.

1. Cash Flow – The amount of money that comes in from rents and other income less what goes out for operating expenses and debt service (loan payment) determines a property’s cash flow. Furthermore, real estate investing is all about the investment property’s cash flow. You’re purchasing a rental property’s income stream, so be sure that the numbers you rely on later to calculate cash flow are truthful and correct.

2. Appreciation – This is the growth in value of a property over time, or future selling price minus original purchase price. The fundamental truth to understand about appreciation, however, is that real estate investors buy the income stream of investment property. It stands to reason, therefore, that the more income you can sell, the more you can expect your property to be worth. In other words, make a determination about the likelihood of an increase in income and throw it into your decision-making.

3. Loan Amortization – This means a periodic reduction of the loan over time leading to increased equity. Because lenders evaluate rental property based on income stream, when buying multifamily property, present lenders with clear and concise cash flow reports. Properties with income and expenses represented accurately to the lender increase the chances the investor will obtain a favorable financing.

4. Tax Shelter – This signifies a legal way to use real estate investment property to reduce annual or ultimate income taxes. No one-size-fits-all, though, and the prudent real estate investor should check with a tax expert to be sure what the current tax laws are for the investor in any particular year.

Do Your Homework

1. Form the correct attitude. Dispel the thought that investing in rental properties is like buying a home and develop the attitude that real estate investing is business. Look beyond curb appeal, exciting amenities, and desirable floor plans unless they contribute to the income. Focus on the numbers. “Only women are beautiful,” an investor once told me. “What are the numbers?”

2. Develop a real estate investment goal with meaningful objectives. Have a plan with stated goals that best frames your investment strategy; it’s one of the most important elements of successful investing. What do you want to achieve? By when do you want to achieve it? How much cash are you willing to invest comfortably, and what rate of return are you hoping to generate?

3. Research your market. Understanding as much as possible about the conditions of the real estate market surrounding the rental property you want to purchase is a necessary and prudent approach to real estate investing. Learn about property values, rents, and occupancy rates in your local area. You can turn to a qualified real estate professional or speak with the county tax assessor.

4. Learn the terms and returns and how to compute them. Get familiar with the nuances of real estate investing and learn the terms, formulas, and calculations. There are sites online that provide free information.

5. Consider investing in real estate investment software. Having the ability to create your own rental property analysis gives you more control about how the cash flow numbers are presented and a better understanding about a property’s profitability. There are software providers online.

6. Create a relationship with a real estate professional that knows the local real estate market and understands rental property. It won’t advance your investment objectives to spend time with an agent unless that person knows about investment property and is adequately prepared to help you correctly procure it. Work with a real estate investment specialist.

 

It does not matter if you are buying a mansion or a small home for your family; the important thing is that you work on ways on how you can make sure of a really good home purchase. Buying a home is one of the biggest financial expenses that would eventually slash your bank account; however, the experience could be a very worthy one if you learn how to understand and ask the home buying questions that every real estate buyer should ask themselves before settling for a single and final choice. If this is your first time to buy a real estate property, it would be helpful if you spend some time knowing and understanding these questions:

1. Where do you want to live?

If you are buying a real estate property because you want a new house for your family, it is important to ask about your preferences in location. In doing so, you are actually narrowing down your options making searching a lot easier for you. One of the things to consider is the kind of lifestyle that you live. For sure, you would not choose to live in a place or community wherein you cannot be contented or you would still be require to travel far just to work on the activities that you love doing. For example, you love peaceful and calm living, it is then ideal that you search for a home within quaint town and far from the busy streets of the city. On the other hand, if you are used to going out to have night out during your free time, then it would be sensible to look for a house located near the city where the nightlife is really vibrant.

Additionally, you also need to put into consideration the location’s proximity to your work, school that your kids go to and also other commercial and important establishments that you need to head to like market and others.

2. What size of home is appropriate for me and my family?

When taking note of the appropriate size of the home for your family, you need to take into consideration the number of family members. This is to ensure that you will not be coming to a choice that is either too small or too big to accommodate your family. You need to choose a house with rooms that are enough to accommodate the members of the family with one spare bedroom that should serve as guest room in case visitors may need to sleep over during unexpected situations. Another thing that you should consider is your plan to increase the number of children from their present quantity. These factors should all be taken note when you are choosing the right size of the home for your family.

3. What are the house features that I am after at?

When searching for your new home, you need to list down all your preferences. For example, you love cooking, and then for sure a spacious kitchen would be a great feature to list down. Other inside features of the house including inside den, spacious living room, attic, basement and etc. are some of the things that should be outlined in your list. If you write down everything you want in a list, it would be easier for you to choose the right one based on your preferences. This also avoids the possibility of missing out something that you have long been hoping to have in your house.

4. How much am I willing to spend for the house chosen?

Finally and the most important is the budget that you can afford. Whether you are buying in cash or getting a home under a home loan or any other financing means, it is important that you not put much strain on yourself and your bank account. When getting a home loan, it would be crucial that you only get the monthly payment that you can afford without causing too much financially difficulty until the end of the payment period. Figure out the price range you are only capable of paying. It is essential to seek the guidance of a mortgage professional because this person can provide you the information and advice on how much you can easily afford to should payment.