A brief look into any guide about investing with reveal that real estate investing is one of the hottest ways to make money. It’s easy to see why. Not only does real estate give you a valuable asset that you can make even more valuable, but you can also receive lifelong returns by renting out to tenants. While real estate investing tends to be more stable than some other investing techniques, there is still a lot to know before you start.

 

Understand the Market

The very first thing you have to do is understand the market. The keystone of real estate investing is understanding what property to get, when you’re getting a good deal and knowing how to properly use that real estate for the best returns. It might seem tempting to get the first affordable house that you can find, but this type of thinking can lead to massive problems.

 

What if the house is in an undesirable area, like with high crime or few amenities? Another problem might be that the house is in disrepair or that the neighbors are awful. Investing in your local area tends to be the best because you know the area and you have a good idea of what real estate is and isn’t good. If you are thinking of going outside your area, then be sure to understand the local economy, businesses, crime rates and other factors to ensure that you are actually getting a good deal.

 

It’s good to have some negotiations training as well to ensure you get the best price on whatever real estate that you find.

 

Limited Funds

Almost every new real estate investor has limited funds, which makes it difficult to enter this investing arena. While you certainly are limited in what properties that you can purchase, there are still a few ways to make a sizable profit with some smart purchases.

 

One of the most popular methods is doing a live-in flip. Flipping a home is a process where you buy a property, improve it with better appliances, new carpeting, fresh paint and so on and then sell it at a higher price. A live-in flip means that you live at the property as you improve it. This will reduce your overall costs as you won’t have to pay for your own home or apartment.

 

Another method is to buy a property for about $35,000 to $55,000. A low-value property may not seem very attractive, but you can make a good amount of money from it. Hand the property to a property management team so that they can take care of finding and managing tenants. If all goes well, then you can expect to get about a 10 percent return on your investment every year.

 

Remember Taxes

Many new real estate investors get caught up in the excitement of finding a new property or bogged down in the details of paperwork and negotiating. It’s hard to know what you should really be paying attention to because everything is new and different. While it will take time to learn the ropes, you have to remember good bookkeeping practices as you go about buying and renting properties.

 

You don’t want to be unprepared for tax season. At best, this will make the process difficult as you try to gather all of your papers and numbers. At worst, you’ll be audited for either forgetting to report something or reporting the wrong amount. Make sure all of your tax documents are organized and easy to access when tax season comes around.

 

Conclusion

Real estate investing is a somewhat difficult arena to enter initially because you are dealing with large sums of money, but it does get easier with time. Remember these three tips as you start your investing journey. Understand the market and your area so that you get the best deals, consider using an investing method with limited funds in mind and don’t forget good bookkeeping practices.

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