How to Invest in Residential Real Estate
Investing in residential real estate is not a way to become rich quickly. Investing in properties successfully requires either substantial reserves of capital, or an excellent credit rating and solid income. Methods for investing in real estate will differ depending on the investor and his goals. Real estate investors look for undervalued residential properties (or those with distressed sellers) and seek to either sell them at a profit, redevelop them, or turn them into rentals.
- Difficulty:
- Moderately Challenging
Instructions
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Finding Residential Properties
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1
Look for undervalued properties in the area where you would like to invest. Foreclosures, pre-foreclosures, damaged properties and those in economically depressed areas tend to have lower sales prices than those on the general market. These properties are usually riskier to invest in and may require more capital to improve, but they may be purchased for less. Homes in foreclosure can usually only be purchased in cash, making them more challenging to acquire.
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2
Contact a licensed appraiser in your area and request more information about property sales in your target area. Appraisers have access to special government databases with home sales data and information about typical tenant incomes. These services may cost money, but the data that an appraiser can provide may save you money in the long run.
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3
Select a property that fits your target criteria.
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4
Purchase the property either in cash or with the assistance of a mortgage. Investing in properties with a mortgage is riskier, but can return greater profits for the amount of capital invested relative to buying properties all in cash.
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5
Make any improvements to the property that you think will increase the value more than the amount invested in the construction. Kitchen remodeling is typically one of the most cost-effective methods of improving residential property value.
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6
Sell the home or convert it to a rental property to profit from your investment. If you don't think you can sell the property immediately at a profit, consider converting it to a rental for a period of time to ensure that you earn some returns on your investment.
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