How to Pull Off Your First Real Estate Investment

May 12, 2021

Getting started investing in real estate can be a real challenge. The cost of real estate alone is often enough to keep people from being able to break in. That said, it is possible to do. Once you’ve gotten yourself in a position where it makes sense to begin investing in real estate, there are some steps that you’ll need to take.

Follow Real Estate Rules of Thumb

To start with, you’ll need to find a property that’s worth investing in. Remember, real estate is only an investment if it’s making you money. There are lots of rules of thumb you can use to determine the profitability and potential ROI of a property. The 1% and 2% rules can help you determine how much you need to charge in rent to be profitable. If you know you can’t justify rent at that rate, move on to a different property. The 3% rule helps you estimate the cash flow you can expect due to depreciation. The 70% rule gives you the maximum amount you should offer on a property.

Get an Investment Property Mortgage

Once you’ve determined that a property is likely to be a sound investment, you’ll need to get an investment property mortgage. This tends to be a more involved process than getting a standard mortgage. The application alone can be 500 pages to complete. You’ll probably need to have a significant down payment ready to go too. This differs from a standard mortgage, where you can sometimes use a smaller down payment or even no down payment in exchange for paying for private mortgage insurance.

Close the Deal and Figure Out Next Steps

After you have the financing figured out, it’s time to close the deal on the property. Make sure you’re prepared to pay for different closing fees. After closing the deal, you’ll need to get going on your next step. If you’re renting your property, you’ll need to draft a lease agreement and find tenants. If you’re choosing to invest via house flipping, you’ll need to get started on repairs and improvements so you can build value and sell it for a profit.

Pulling off your first real estate investment is a big step worth celebrating. To get to that point, make sure you follow the real estate rules of thumb when choosing an investment property. Get the mortgage figured out, and then close the deal and work out your next steps. Once you’ve got things figured out with your first investment property, you can start working on building your own real estate portfolio.

Are you looking to invest in some property? Check out the properties we have for sale!

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