What Do I Need to Invest in Real Estate?

Access to capital is an important part of successful real estate investment.

Like any other type of investment, real estate investment has risks. In order to minimize risk, savvy real estate investors plan and research before dedicating funds to a real estate venture. Various types and levels of real estate investment exist. Typically, one major goal of real estate investment is to generate a financial profit from the real estate investment within a certain time period.

Prevention/Solution

Before investing in a real estate venture, wise investors set clear financial goals. The goals will help determine which types of properties to invest in, when to invest and how much to invest. For example, if a person is interested in an investment that will produce regular income for an extended period of time, purchasing in a rental property might be the best option. For someone who is interested in obtaining larger amounts of cash at slightly irregular times, the practice known as house flipping may be the best route. House flipping is when a person purchases a home, makes budget-friendly improvements and quickly sells the property for a profit.

Features

Accurate information about the real estate market is essential for the success of a real estate investor. Knowing the current market for sales, rentals, labor, supplies and other real estate related costs impacts when and how a person enters real estate investment. Accurate market forecasts and knowledge of upcoming legal or policy changes that could impact property values are also key pieces of information. According to Property-Investing.org, a resource site for real estate investors, appropriate timing is one of the biggest factors in profitable real estate investment.

Expert Insight

Hire licensed, experienced professionals whenever possible. Relying on gut instincts and amateur advice may cost less in the short run, but could end up costing a real estate investor more money long term. For example, using friends and relatives to renovate a house that is going to be flipped, instead of hiring a licensed contractor, could result in shoddy work that causes an accident or exacerbates an existing problem. The Contractors State License Board in California recommends that property owners hire only licensed contractors who have at least three references.

Considerations

Many real estate deals are financed with traditional loans from banks. In order to secure a loan with a moderate interest rate through such an institution, the property buyer typically has to have a good credit score. Loan Safe, a site that provides borrowing advice, notes that a credit rating of 700 or above almost guarantees getting the fast loan approvals and the lowest interest rates available on said loans.

Function

Capital is the means by which one secures real estate. Capital can be cash or credit. Whether a real estate investment is by a single individual or a group or corporation, adequate capital is necessary. Some real estate professionals make money by finding real estate deals for other people to invest their funds. Such people are not obligated to invest their own resources into a project. Their job is to pair capital to projects in need of funding.

References

• Property-Investing.org
• California Contractors State License Board: Ten Tips
• Loan Safe: How Does My Credit Score Rank

Resources

• Scam Busters: Foreclosure Scams
• National Association of State Contracting Licensing Agencies