One of the most stable investments anyone can make is in residential real estate. Investing can be your chosen path to that nest egg you've always wanted to have for your family to retire on, or it can be a side hobby for extra income when you need it. Whatever the purpose, real estate investing is one of the best shelters for your capital should you choose to start making strategic moves to increasing your net worth.
Make Your Money Going In
If you've read many of the books currently available on real estate investing, you'll hear that a sound approach when constructing your offer on a piece of offer is to make your money going in. I agree with this approach, and would also like to add that this is the most vital concept for you to grasp as a real estate investor.
Your job is to reduce the amount of risk you will encounter when under going your real estate transaction. The best way to accomplish this goal is to make sure you know your numbers. What is the cost of acquisition, cost of re-selling, cost of repairs on the property? Make sure on your analysis of the property that you factor these numbers plus your required profit into your offer. Doing so will enable you to have the peace of mind that your offer will make this transaction a "win" for you. You will also be empowered to say "no" when a counter-offer is sent in response to your offer and it violates the investment criteria you've set forth.
Renting A Home
I will always be an advocate of renting out an investment property, as long as there is a history of properties with similar features, amenities, and condition successfully renting in the area. When renting a home, you get to take advantage of three distinct sources of income:
- Income acquired through debt paydown.
- Income through appreciation.
- Passive income through rent and positive cashflow.
This trinity of income will enable you to be at the most leveraged position for your investment portfolio. As you accumulation of income producing properties grow, so does your net worth, passive income, and hopefully at some point in your investment career, passive positive income.
Flipping A Home
Quickly reselling a home is another strategy widely used to generate quick cash. I personally will use this method to save up a substantial down payment on a rent-able property at a later time. I advise for my real estate investors to flip a home if they do not want to deal with property management issues and are looking to generate capital at a much faster pace.
When flipping homes, it's always best practice to have a significant amount of capital to pay for homes in cash. However, most investors are not ready for this strategy so creative financing will usually come into play. For financing an investment property, it's important to make sure that you team yourself up with a great mortgage professional that knows your intentions with investing in real estate and guides you to the right programs for repeated and long term use.
Two Routes to Investing in Real Estate
Investing in real estate is a great opportunity for you to create a nest egg for you, and your family, to retire on at an early date. If you are proactive and intentional about your approach in residential investments, while teaming yourself up with a great real estate and mortgage professional, you can ensure yourself a great investing experience for years to come.
--
Steve Castaneda, Realtor, is a real estate professional specializing in Houston Real Estate. He focuses on helping his client investors make the most informed and intelligent decisions regarding their investment in Houston Texas Real Estate. He is also part of the MyHomeHouston team whose website features a Houston MLS tool for viewing properties for sale in Houston, Texas.
Comments(0)