Have you always wanted to get into real estate investing but have never really known what first steps to take or what your strategy should be for your first few properties? Well let me give you some ideas on what approach to take to start your property portfolio and generate some cash so you can grow it, while you also slowly increase your long term income to the point where you can give up your day job and totally rely on your property investments.
Getting Started in Real Estate Investing
A very good option for getting started in real estate investment if you don’t yet have the funds to buy a property outright is to flip a few houses first. House flipping involves buying a run down house, renovating it and then selling it at a profit. The more of the renovation work you do yourself the more profit you make. You can then reinvest that profit into a further property to flip until eventually you have enough profit generated to buy a house outright that you can let.
Choosing the Right Property to Flip
If your funds are limited then bear in mind that house flipping needs more than just cash to buy the house, or put money down as a deposit on a mortgage, but requires a fund of cash to renovate the property as well. You need to calculate all of this before you invest in a property because the worst case scenario is that you buy a property, but run out of money to renovate it, and then you’re stuck with a property no one wants apart from other house flippers, and won’t turn a profit.
As earlier stated the best way to make a profit is to do as much of the renovation work yourself as you’re able. By bringing in contractors to do work, your profit margin is eroded and you can easily end up in a situation where the contractors make more money out of the property than you do.
But actually the main key to buying the right property is choosing the right property in the first place. Your ideal property is the worst house on the best street in town. The final selling price and demand for it will be high, and the initial buying price will be low but you may need to fight off some competition to buy it. So keep an eye out for any property like this, and even talk to realtors who may allow you an exclusive access to these types of properties before they hit the market.
If you choose the right property and you get the work done quickly you may be able to generate around 20% profit on the property in as little as six months, and then reinvest that into the next property which can then be a bigger property that will generate even higher profit amounts.
Once you’ve flipped a few houses you can then consider letting out a property.