If you’ve done your homework and decided that real estate investing makes sense for you, your financial situation, and your future goals then you’re ready to start buying investment properties. Here are the 6 Steps to Real Estate Investing:
1. Pay in Cash
This one is definitely up for debate because it can take years to be able to save enough cash for an investment property, especially here in Nashville. The perk of paying with cash is that you save thousands in interest, you don’t have to worry about foreclosure, rent isn’t going towards a mortgage, and there’s less risk. BUT if you don’t have that amount of money in cash to purchase, don’t let it stop you, there are options.
The general rule of thumb is to have about 5% of your net worth tied up in real estate investments. The reason for this is if you have your entire net worth tied up in the real estate market and we see a mini 2008 again you’re more then likely going to panic.
3. Stay Local
If you live in Nashville, you want to invest in Nashville or surrounding areas. Two reasons for this – 1. It won’t be necessary to hire a property management group. 2. It will be difficult to assess damages and repair requests. Even if you hire a property management group, you still want to be close enough to check on the property every now and then.
4. Be Prepared for Risks
Buying rentals isn’t as easy as closing, immediately getting renters, and only checking in once a year. There will more than likely be times where you’re in between renters and things happen with appliances, leaks, maintenance, what have you.
5. Start Small
Not everyone is cut out for being a landlord. It’s not a good idea to buy a house or multiple houses out of the blue if you’re unsure you will like it. Start with a garage apartment, a single room, or a previous home to test the waters first. Also, talk with investors who are in the game and see what information they can pass along. Here are the 4 Different Types of Real Estate Investments.
6. Hire a Real Estate Agent
You don’t need to buy real estate on your own, especially as a buyer, why would you? Even in the early stages, it’s smart to talk with a local agent to get a snapshot of the market. They can offer advice and prepare you for what the process will look like. Then when it comes time to buy they’ll help you get the best deal.
Obviously, there is much more that goes into getting started in real estate investing than these 6 steps. This is meant as an overview and a way to get the ball rolling. It’s always a good idea to speak with your financial advisor before jumping in because it is such a big decision.