Often You must have heard people saying that real estate investments have greater returns, opportunities and reliability. And some of the time it’s actually true. If done correctly, Real estate could be the most lucrative investments, offering both income – in the form of rents – and appreciation. Although getting started can be daunting as it requires time, patience and (of course) capital, with the right knowledge, tools and information Real Estate Investments may be more accessible than you think.
It’s always the beginning that’s most challenging, but if you get off to a good start, half the battle is won and investing in real estate is no different.Taking small steps is the key to Building Wealth through Real Estate Investing and attaining Financial Freedom.
There’s no single definition of what financially prepared means. And there’s no single financial figure that will help you reach that point of financially preparedness. However there are some signs or indications to help you identify the right time to start investing. Following are the signs:
You have little or no debt.
You can pay for monthly expenses with just your or your spouse’s income.
You pay your bills on time.
You have an adequate emergency fund.
Your net worth is growing year after year.
It all comes down to investing in information and knowledge and then extracting its value. Fortunately, we live in an era of unprecedented information availability. In the world of real estate, information and knowledge about location still plays the most important factor. You may consider taking the help of local real estate investment advisors for more options and decision-making.
You may have heard this before, One simple rule of thumb to adopt is going by the 4-3-2-1 ratios to budgeting. This ratio allocates 40% of your income towards expenses, 30% towards housing, 20% towards savings and investments and 10% towards insurance.
While this is not a hard fixed rule, it is a useful guide to ensure you are not over-allocating resources towards any one single area while neglecting the rest.
A real estate investment trust (REIT) is created when a corporation (or trust) is formed to use investors’ money to purchase, operate, and sell income-producing properties. REITs are bought and sold on major exchanges, just like stocks and exchange-traded funds. As a result of their high, steady dividend income and long-term capital appreciation, REITs have historically delivered competitive total returns.
Almost everyone in real estate investments uses this method to quickly determine if a property is worthwhile, known as the 1% rule (or sometimes, the 2% 0r 3% rule) The 1% rule states that an investment property should rent for at least 1% of the purchase price. So, for example if the property you are looking to invest in has a purchase price of $140,000 –then it should bring in at least $1400 per month in total income.
Some investors choose other ratios, such as the 1.5% rule or the 2% rule to achieve greater returns and greater cash flow.
Another thumb rule, generally Investors use the rule of 5% this generally involves, Multiplying the value of the home by 5%, then divide that number by 12 to get your breakeven point. If the monthly rent on a comparable home is below the breakeven point, it makes financial sense to rent. If the monthly rent is higher than the breakeven point, it makes financial sense to buy.
With regard to real-estate investments, let us try to understand this concept. If you decide to invest money in a property in Austin, for example, the opportunity cost would be what you could have made by investing in any other place, say Houston, Stafford or even in some other assets like equity, gold etc.
No More Than 10 Percent Down Payment
Buy At Least 10 Percent Under Market Price
Never Pay More Than 10 Percent Interest
Rather than trying to invest directly in real estate, you can use an indirect approach with the help of companies that have a real estate connection. Companies that manage storage units or build apartment buildings can be solid choices for investment.
Buying and flipping properties is a common strategy, although like rental properties, flipping takes lots of work. It means renovating homes and learning to identify up-and-coming neighborhoods that will let you sell your purchases at a premium.
If your home flipping strategy involves renovation and construction, it means taking on extra risk and high out-of-pocket costs. Long story short, it’s not as easy as it may look on HGTV. You’ll need building permits for renovations, and remodeling costs may run higher than you expect, especially if you hire contractors or outsource other work.
Diversification is a common investment strategy through which investors spread their portfolio across different types of securities and asset classes to reduce the risk of market volatility. Investors engage in Real Estate Investing by diversifying their portfolio across a variety of properties, each with its own level of risk.