The investment real estate market is booming in 2018. Zillow is even getting in on the action, hoping to buy 300 to 1,000 homes by the end of the year.
With risk low and opportunity for profit high, it's a tempting career. This might be your chance to leave that job you're bored at.
Before you make the leap, let's make sure you are ready for a career in real estate investment.
Can You Afford It?
The first step in deciding if you should begin investing in real estate is to determine if you can afford it. Real estate investing can get expensive on your own.
The Cheap Option
If you have $500 to $2,500 to invest, you are not ready to make this a career. Try a real estate investor like Dividend Reinvestment Plans (DRIPS) instead.
This lets investors own a share of a commercial real estate parcel. A mutual fund company can help you get started. This is a great way to get your feet wet in the industry.
Slightly More Expensive
For $5,000 to $50,000 you can join a real estate investment group (REIG). These groups pool the investor's money to buy apartments and condos.
The operating company collects a fee for the management of the rental units. You own a stake in the real property and get a monthly cash return.
You Have Money to Spend
The most expensive and familiar method of investing is to become the landlord. In today's mortgage market this means you need to have a large amount of money to put down.
Most mortgage companies need at least 20% down. That means you'd need $20,000 for a $100,000 property.
Then you'll need money for the closing costs. Finally, you'll need to pay to have the property fixed up to a rentable condition.
What Will You Invest In?
When it comes to the basics of real estate investing, knowing the type of property you want to invest in is key. The location will dictate a lot about what you invest in.
You could buy commercial property. Rent it out to a business or sell it for development.
Suburban areas are good for single-family home investments. Apartments and condos are an option too.
If you live in a vacation area, these types of rentals have the potential for the highest monthly income. They are also the most labor intensive.
Is the Market Right?
You've decided you can afford to invest in real estate. You've found the types of properties you want to invest in. Before you spend money, ask if you can make money in the current market?
Do market research of the surrounding properties. Use their rental rates to determine your return on investment.
An industry rule of thumb states, never invest in a property with a rate of return lower than 8-10%. Don't forget to factor in regular upkeep and taxes.
Start Your Real Estate Investment Career
Investing in real estate can be the career that gives you financial freedom. If you don't have a lot of capital, consider alternative ways to invest in real estate.
Once you have the ability to buy property on your own, decide what you want to invest in. Consider the local area and the amount of work you want to put in.
Look at the surrounding market status. Consider what other properties are doing. Look at the turnover rate, the rental rate, and trends.
Don't let yourself get carried away with your real estate investment. Only invest in those properties that can make you money.
Ready to get started? You'll need these tips for being successful in your new real estate career.