Let’s review your strategies! Remember that your first investment property should always be your primary residence; once this investment property has been paid in full, other investment properties can begin being purchased as investment properties. Here are the steps involved with expanding beyond primary residence ownership.
We recommend you to read the article: How to invest in real estate
Step 1: Pay Cash
This tip goes without saying! Always pay in full by cash when purchasing or renovating investment properties, and never use credit!
Real property investment «gurus» often give advice that differs from ours; however, debt has always been risky, and any investment that takes on more risk means an increased chance that all your funds could vanish without a trace — this is certainly no good!
An upfront payment of 100% removes debt from the equation and lowers risks associated with homeownership. Are you having difficulty renting your apartment out? No need to panic! Without mortgage payments to service, no renters are needed immediately anyway!
Even if the market suddenly changes when you try selling off the house you bought? No matter — that is perfectly okay and is the perfect opportunity to wait out.
Total payments also allow you to earn more quickly; instead of needing to repay loans, all profits remain your own and enable intelligent real estate investment!
That being the case, real estate won’t come cheap, but that doesn’t need to be a cause for alarm; use any spare change as part of your retirement savings strategy, and don’t feel pressured into purchasing too soon! All this leads us back here…
Step 2: Diversify.
Have you heard the expression, «Don’t put all your eggs in one basket»? Well, this advice applies equally well when managing an investment portfolio.
Once your finances reach a milestone (more on that below), we suggest investing 15 percent of household income into retirement accounts using mutual funds as your wealth-building base. Once this fund is secure, it can be invested in real property investments.
Make sure not to use money from your savings account to purchase property or anything else; real estate investments should remain independent from retirement funds.
Step 3: Stay local
Investing in Arizona when living in Illinois would only compound issues; trusting management companies with your property becomes much more challenging to monitor effectively in remote locations.
However, hiring a management team could prove invaluable in ensuring things run smoothly, but don’t forget that as the property owner, you must always stay abreast of your investments!
Step 4: Anticipate risks
Renting out your property often doesn’t go smoothly, and quickly finding tenants to fill it each year — some rentals remain empty for long stretches, becoming difficult when financially unprepared to manage them effectively. Even under ideal conditions, appliances fail, and roof leakage occasionally occurs — be prepared!
Establish a fully funded emergency fund as the best way to prepare yourself against risk and unexpected expenses.
Step 5: Start Small
Try temporarily renting out part of your garage or an additional bedroom. That will give you an idea of what renting property entails.
Engaging with other real property investors is also recommended; lunch with them and inquire what information would have been most helpful before starting their real estate career.
Step 6: Retain a Real Estate Agent
To successfully invest in real estate, one must acquire an expert real estate professional in their chosen region or city. They’ll know which areas need attention as an investor and any obstacles you could run into as an aspiring real estate investor, helping negotiate better prices than you could on your own when the time comes for purchasing homes or properties.