You’re interested in getting started in real estate investing, but you’re not sure how to start. You’ve watched your share of the real estate shows on HGTV, and you find it appealing, but how do you transition from watching on the couch to actually owning an investment property? Is it as easy as they make it look on TV? (Spoiler alert: No.) Here are some helpful tips that will get you started as a real estate investor.
1. You don’t need to be an expert to get started.
It’s easy to get bogged down in research; there are hundreds (possibly thousands!) of books about real estate investing, each claiming to be a must-read before you dive in. That’s not the case. Don’t allow yourself to become overwhelmed by the volume of information available, putting it off again and again until you end up talking yourself out of it.
2. That said, you should do your homework.
A lot of the information available is valuable, and it can help you narrow your focus. You don’t want to jump in without knowing where you might be landing. Figure out which niche is best for you, and learn as much as you can about it. Talk to other people who have succeeded in the corner of real estate investing that you’re interested in, ask them questions and learn from their mistakes. Failure to do so when getting started in real estate investing could result in a major financial flop.
3. Check your credit.
Before you get too much further in the process, you should confirm that you’ve got a credit score that lenders will love. Gone are the days of banks handing out mortgages to anyone who walks in the door— now lenders require a minimum FICO score of 700 before they hand out loans to borrowers seeking to purchase investment properties. Additionally, your debt-to-monthly-income must be well within a manageable range, or they’ll wave you off.
4. Create a plan.
You’ve done your research, you know your credit score is golden, so now you need to put your vision on paper. Sit down with your pencil, paper, and calculator and crunch those numbers. How much will the average renovation cost? How much are you willing to spend for a property? Can you float it if you’re not able to get a renter in right away? Determine what you want to put into the property, and the minimum you must get back to break even. You can now approach potential properties with a number in mind, so you can eliminate those that won’t fit your budget without wasting time looking at them.
5. Decide where you want to invest.
Many green investors restrict their searches to properties near their homes when getting started in real estate investing; this is a mistake. Push your boundaries beyond your home base, and you might find that it’s a better area for rentals. Sure, it would be convenient to be close to tenants should repairs or other issues arise, but if the house is in excellent shape prior to move-in day, you shouldn’t be getting constant tenant calls.
6. Find an investing group.
A group of people who have experience in real estate investing can be a lifesaver for the novice. This doesn’t mean that you should inundate them with constant questions, but most people wouldn’t mind sitting down for a conversation about investment. Or, better yet, ask them to show you their properties. You can learn a lot, and they can show off what they’ve done. It’s a win-win for everyone.
One great real estate investing group in the Richmond, VA area is the Richmond R.I.N.G. They meet once a month and bring in guest speakers, and help connect members with people who can help them advance their goals.
If you are looking for more personal assistance, you can check out the one-on-one real estate mentoring program offered by Rich Lennon, owner of RVA property solution.s
7. Find a reputable realtor.
Don’t just Google “realtors in my area” and pick one at random. You’re going to have to do a little digging to determine which one is best for you (Do you see a theme here? Real estate investing requires a lot of studying!). When getting started in real estate investing, look for a realtor that has a lot of experience with investment properties, and who is acquainted with the lingo. If they give you a blank look when you ask about return of investment or debt service, move on to the next person.
Another way to find good investment properties is to connect with a wholesaler. RVA Property Solutions maintains a list of wholesale properties on our website–be sure to check back frequently for updates or sign up for our wholesale buyers email list to get notified when a new property is posted.
8. Understand the renovation timeline.
In an ideal world, renovations would take about thirty days, and then you could turn around and rent the property immediately. Unfortunately, that’s rarely the case. Imagine your worst-case scenario for renovation, and then tack an extra thirty days to that. A conservative approach to renovation is best—you’ve got to be prepared for issues to arise that will push the deadline back.
9. Know that real estate investing is not without risk.
Of course, most investments come with some level of risk, but you can mitigate much of it with careful behavior. If you’ve done your homework (see?), you can avoid many of the pitfalls that new investors face—these pitfalls can be financially damaging.
10. Keep track of the books.
This isn’t as fun or exciting as picking a property and renovating it, but it’s a necessary part of the process. Create a logical system to keep up with your paperwork from day one—you’ll never regret it. Talk to an accountant as well as a lawyer to figure out your legal holding status and your taxes, and you’ll be in good stead.
With some hard work and forethought, you will be reaping the benefits of your foray into real estate investing. Contact us to discuss getting started in real estate investing, especially in the Chesterfield, Henrico, or Greater Richmond area.