More and more investors are entering the real estate market these days. Properties have replaced gold and other precious metals as the vogue investment opportunity for those looking to continue building upon the successes found in the stock market. However, the real estate marketplace has always been a fantastic source of wealth generation – the most profitable investors in our world understand this, and the layman is starting to catch on to this long-range trend in creating lasting cash flow and wealth.
Anyone can begin to buy into the real estate market, but it takes a savvy eye to find properties that offer unique dividend creation potential, and an even better journeyman to move properties from unwanted to cash creators. Entering the property market takes a lot of sweat and equity, but done well, your new investments will yield massive returns on investment in short order. The property market creates incredible upward mobility for fast learners willing to take on risks and ride the reward that follows.
Keep a close eye on cash flow.
The most important aspect of a successful real estate investment strategy is the cash flow. Understanding that you will have major expenses on the outgoing side is the first piece of the puzzle – the question is how you will make up for that outgoing cash with your targeted property buys. Real estate offers a unique advantage in that the majority of your buying will be done with someone else’s money. Instead of routinely pumping your own cash into the stock market or commodity purchases in order to facilitate a long term buy and hold strategy, you will be borrowing money from the bank or a private lender in order to make rapid buy and sell transactions.
It may be difficult for a new real estate investor to keep track of all this moving capital, but the long and short of it is that you will want to account for every single line-item expense, including interest on the mortgage payments that you make while in possession of a property.
Depending on your strategy here, there are divergent paths for securing the funding for a property purchase, but both patterns hinge on a similar strength: Your top notch credit score. Keeping a pristine credit report is essential for maximizing your return on investment in any local property market. Your credit score is the tool that lenders use to size you up as an investment. Keeping this relationship in mind is crucial to finding success here, and in borrowing for your own mortgage at some point.
This is because no matter the path you choose for capitalizing on generated returns, you will need to rely on creditors to lend you the startup capital required to get your business venture off the ground. This is what separates REIT investors from real property owners. The REIT marketplace is a sector of the stock market and is a fantastic proving ground for investors to cut their teeth in the ways of real estate trading. However, nothing quite replicates the value and growth potential as the real thing.
The first stream of real estate income: Rent payments.
The first category of real estate investing comes in the form of property management. Any good real estate investor considers this monthly cash flow as a part of their portfolio of property holdings. As a landlord, you can count on the rent payments hitting your account like clockwork if you’ve created a professional and healthy relationship with your tenants. Whether in Fort Collins or Colorado Springs, rent prices are on a long upward trajectory and people are buying their first homes later in life than ever before – 33 is now the average first-time homebuyer age in the United States. This means the marketplace for landlords is ripe for capital gain.
There are some necessary considerations here though. Getting to know contractors that you trust at a Denver roofing company and utilizing the same work crew for each job is a great idea for lowering your overall costs throughout the years to come managing each of your properties. Using the same contractors on multiple jobs is important because finding a new crew each time you need repairs done is the surest way to end up with shoddy workmanship. Take the time to find an outfit that you trust with years of experience in the industry to do all your maintenance work on the kitchens, roof, windows, and elsewhere. Each need should be accounted for in your research before you buy into your first property so that you can organize rapid repairs in order to get your property ready for the market, and in the future should the need arise in the middle of a tenancy.
All this goes into the consideration of your times earned interest ratio. TIE ratio is a metric often used in relation to a company’s earnings. The TIE ratio defines a business entity’s solvency, or its ability to pay back debts, should it abruptly stop doing business. This is a hypothetical calculation, of course, but a high ratio means that your enterprise is in the black and moving in a positive direction. In real estate, you always need to know where your finances are trending in order to make midstream adjustments to keep yourself afloat.
Flipping homes as a powerful supplement.
Flipping houses is the second stream of real estate investing. In this approach, you will seek out foreclosure homes and other fixer-uppers that are on the market for a steal. Here you will want to invest as little capital as possible in the purchase and the upgrades while trying to squeeze out the highest value possible. Then, as quickly as possible, you’ll put the home back on the market and try to sell it for a profit.
House flipping can be incredibly lucrative for those with an eye for the price value. Many homes listed at bargain pricing have something severely wrong with them. Maybe the roof is falling in; there might be structural damage; possibly, the previous owners or tenants destroyed the interior of the home and it will need a complete rebuild. These homes go for incredibly low price points in the market because they are often sold by the bank in order to recoup a portion of their losses in the mortgage lending process. Finding the properties that look rough but won’t cost a lot of cash to fix up takes years of experience in the field, but with the help of a trusted team around you, this learning curve can be cut down significantly.
Invest in yourself in order to put your best foot forward.
Real estate is about research and smart money, but it’s also about swagger. In order to succeed in this space, you will need to invest in your look as well. Adding petite blazers, jackets, blouses, or other stylish outerwear to your dress is a great way to show off your best self to prospective buyers or renters. People form impressions at a rapid pace, sometimes as quickly as seven seconds. This means your look, attitude, and body language may be all that a person has to go on when evaluating your trustworthiness. In order to succeed in this business, you will have to learn to develop reports with customers in these first crucial seconds with your inviting attitude and professional looks. Only then can you start selling clients on the dream home they are standing in and raise your net worth in the process.
Real estate is a tough marketplace, but with a bit of practice, you can grow from an individual investor to a team leader that rakes in profit and grows net income every day of the week.