I started investing in real estate as soon as I got out of college. I didn’t know much at the time, but I did know that I would rather own a house for myself than pay rent for something I didn’t own. In my mind paying rent was like flushing money down the drain.
I’ve learned a lot about investing since then, and today I want to share some of the things I’ve learned.
Tip 1: buy a house
The easiest way to start investing is to buy a house for yourself. I always say to make sure you buy one that has multiple exit strategies. This means that you should look for a house that you can do multiple things with when you’re ready to move into your next one. Whether you want to sell it or hold onto it, it’s always good to have options.
Houses will naturally accumulate value over time, so even if you decide to sell the house when you’re ready to move, you will likely make money on the transaction. That’s what investing is all about. Buy something that’s worth more money when you’re ready to sell it!
Houses can be expensive, especially in the current market, but don’t let this scare you away from buying a house. To make my monthly payments, I got a couple roommates which helped make the house much more affordable. I was fresh out of college so I was used to roommates anyways.
Also, you don’t need to buy your forever home as your first home. I see a lot of people try to go big on their first house. This is not usually a good idea. Buy a house that will work for a few years while you build up your savings, then upgrade to a nicer house.
Once you’re ready for that upgrade, don’t assume you need to sell the house you already own.
tip 2: Keep what you own
This is why I think it’s good to have multiple exit strategies. When I moved on to my second house, I didn’t sell my first. Instead, I held onto it and now I rent it out and it acts as a strong source of passive income. That house brings me money every month that I have to do very little work to earn.
Of course, this isn’t always a viable option. I understand there are a lot of situations where you may need the money from selling your house to buy the new one. If you need to, you absolutely can, but it is preferable to hold onto it so you can start renting it out.
tip 3: be selective
One of the first things I learned when I started renting out my old house was that I needed to be careful about who I let stay there.
The first person I ever let stay there approached me and told me that his job started in a couple days, he’s currently in a hotel because the place he had fell through, and that he would put down a double security deposit as extra insurance for me. Looking back, there were a lot of red flags, but I didn’t know it at the time. He showed me a pay stub and I let him rent the place. Overall, that situation turned out mostly alright, but I’ve heard some horror stories from other investors about bad tenants.
tip 4: get started
No matter what happens, you can always learn from your experiences. For instance, even though I didn’t catch some of those red flags, I was still able to learn what they were for future tenants.
Even if you have a bad experience with one tenant, you can move forward with some sort of knowledge gained for future stays. One of the most important things is to be a lifelong learner. You might not know everything or have a perfectly run operation when you start and that’s okay. As long as you’re willing to learn along the way, you don’t need to know everything at the start.
The most important thing to do is start. Whether that means you buy a home that you can rent out in the future or you spend some money you have set aside to purchase a new property, the most important step is simply to start.
This is especially true in real estate as home values are continuing to rise.
The best time to start was 5 years ago. The second best time is now.
If you are an agent and would like to know more, you can check out our parent company’s website thediyrealty.com. We’re doing a lot of investment stuff over there and we have a webinar coming up for real estate agents who are looking to start investing.
If you would like to buy or sell a property, don’t hesitate to call the number on our website. We would love to help you with all your real estate needs.
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