Real Estate Investing is something that has been around for ages but has gained more interest as more individuals share their stories of success in the real estate market. Watching others jump into real estate investing and doing it yourself is a whole different story, and sometimes involves using other people's money. The question is: how to find real estate investors when you need them?
What is Real Estate Investing?
If you're among the many who are still not completely clear on what real estate investing is, let me break it down for you. Real estate investing is taking either a loan or cash and putting it down on a property to make money off of it. Some of these investments include:
Commercial and industrial investments are any purchase of a commercially zoned property with the intention of leasing it out or making money on it in some other way. Large corporations or a group of investors are usually the ones to invest in the commercial real estate. Many individuals find it too costly.
These are the most common--and some would argue the most fun-- investments. Residential investments include buying homes and rehabilitating them to sell (called flipping), buying an undervalued home and holding onto it to sell in the future for a profit, or buying a house and renting it out.
Investing in land is less profitable unless you know what you're doing. The idea is to purchase a parcel of land that will be more valuable at a future date, where you will then sell it. For example, imagine you knew of plans for a highway going up in 10 years. A good investment would be to go out and buy a parcel of land where they are building the road. This is an investment because you know that the plot will be worth more to the government in 10 years than it is now.
These include any extra way of making money from your real estate properties, like installing a vending machine, renting out parking spaces, etc.
How to Become a Real Estate Investor
Becoming a real estate investor is more accessible than it seems-- if you're willing to take a risk. It all begins with your first investment property. Whether you inherited a property or are diving into a multi-family listing, it's important to know what you're jumping into. Do as much research as you can on the location and history of the property. Then either inspect the property yourself or send an inspector over to check it out. Knowing as much as you can about the property up front could saving you a lot of money in the future.
Next comes the buying process. If you're going to be investing a lot, it's essential to create a relationship with a local realtor who is knowledgeable about investing. If you are using a 1031 exchange for an investment, be sure to talk to a realtor and loan officer who know the processes thoroughly. The loan and lender you use will also impact the amount of money you put down on the home as well as the term of your mortgage. Make sure you understand the terms of your loan and the regulations surrounding your investment. Once you sign those papers, you are an investor! To learn more about becoming a real estate investor, check out these articles here and here.
How to Find Investors
Once you begin your investment journey, find other investors to go in with you on investment properties. Before looking for those who would be willing to invest with you, give them a good reason for doing so. If you have past investments, create a portfolio. Include pictures, spreadsheets complete with every repair, the costs that have gone into the investments, as well as the amount of money you have gained on each piece of property. Another good idea is to put together a business plan for future investment properties. Include pictures, estimated itemized costs, and a projection for what you plan to do with the property. Having a plan helps others feel comfortable investing with you.
Once you have prepared, look to your network before soliciting people you don't know to invest with you. Often you'll find a relative or friend is looking to build out their investments with their 401k or other retirement funds and would be interested in the opportunities you're offering. Once you find a few people who are interested, make sure you are the right fit for each other. You want people who have the same investment goals and would be interested in helping you put in the work if that is what you are looking for. Knowing goals and expectations in advance helps make the investment process more enjoyable and profitable.
Deciding to invest in real estate can be a scary process, but it doesn't have to be. Having a knowledgeable local agent helps, but even better than that is a knowledgeable local agent who is aligned with your budget as well. That's why we created Clever. Call us at 1-833-2-CLEVER or complete our online form to get connected a top-rated local agent that will list your home with a discounted commission rate.