“Make your money work for you!”
We have always heard or been told that throughout life and many work to achieve the ever so elusive, Passive Income. Many invest in the stock market, mutual funds, and even themselves by starting a dream business. While all of these can get you a return on your investment, there is one thing that trumps most investment ideas………REAL ESTATE. Its been said that over the last two centuries, about 90 percent of the world’s millionaires have been created by investing in real estate. That is a very high number given something that anybody can invest in. For the average person, how do you get started?
Many would say to buy where you live and rid yourself of rent and also achieve the tax benefits of owning a home. While this is the approach I advise and took, there are many different ways to get in Real Estate investing. Here are a few tips and ways one can get started investing into Real Estate.
BUY MULTIFAMILY PROPERTY (BUY AND HOLD)
My personal favorite is really the first step to Real Estate investing, and that is to own where you live. To start out as a Real Estate investor, it makes the most sense to purchase a multifamily home (if you don’t already own a home). The cool thing about buying a multifamily home as your first home is that it will only require you typically to put down 3.5% of the purchase price. Most lenders and banks will also forecast and use 70% of the projected rental income you’ll gain per building towards income to approve you on. That allows you to purchase anywhere between a 2-4 unit property, in which you would need to occupy one for just about a year. In a ideal situation, say you purchase a 3 unit building, 2 of those rentals will typically cover the mortgage. In that situation, you’re effectively living rent and mortgage free. A savvy consumer would still save what they would’ve been paying for rent into a savings account for their next purchase or home. After that year is over, you’re eligible to rent that unit out and buy your next home (single family) for 5% down. For somebody looking to purchase another building with more than 1 unit, it will typically require anywhere from 20-25% down of the purchase price. If you’re looking to find out whats needed to get that process rolling, visit http://homesbymarques.com/needed-begin-home-buying-process
‘Flipping” is what happens when one buys a home in not so great condition, and renovates and makes improvements on the home and turns and sells for a profit. Just like all else, there is a lot that goes into doing so. One typically gets a “hard money loan” (specific type of asset-based loan financing through which a borrower receives funds secured by real property. Hard money loans are typically issued by private investors or companies.) and borrows a percentage of the home purchase price and renovation costs. This is a very tedious business that takes an experienced and seasoned investor to do. There are books that explain the ins and outs of this business. The biggest piece of advice here is to have a strong contractor, agent, and attorney to help you ease your way through the process.
RENTING VACATION HOMES AND BEACH HOUSES
This is when investor buys and uses a home to rent out to offset the costs of ownership in a desired location. It’s typically purchased in an area that has attractions such as a Disney World, beach locations in warm areas, and other desired places. Most investors hire a management company to handle marketing, scheduling, upkeep, and a rent collection. Conventional financing terms are available for most second home rentals.
COMMERCIAL REAL ESTATE
Commercial properties are purchased then leased out to companies for office spaces, restaurants, and retail. Commercial real estate investors are mostly long-term investors looking for monthly lease income and price appreciation. Commercial investors can use traditional long-term loans or commercial hard money lenders for fix-and-flips. This is more for those that have capital and experience to manage and run.
I hope that this cleared up and helped you see that Real Estate, when invested in correctly, can provide the passive income and financial flexibility many are chasing. As always if you’re looking to get started in the process and learn what it takes to buy your first home, visit the link below for our Free 12 Month Plan on Buying Your First Home.