We are often asked how to get started in real estate investing. It really depends on what you want to accomplish, and today we’re helping you take the steps you need to begin investing in rental properties.
Establish Your Investment Goals
The best way to start is by establishing your goals and setting your expectations. Some people invest because they are trying to shelter their regular income through real estate. If you’re paying way too much in taxes, you can shelter it with rental properties. Other people want to buy a property that will pay for itself over time. You can save for college tuition when you invest properly. For some investors, cash flow is the most important goal, so they can have rental income every month. All of these are valid reasons to become a real estate investor. The way you invest depends on those goals. So, have a clear vision. That’s the first step.
Leveraging Money on Real Estate
How you invest depends upon your financial situation and those goals you’ve established. Some owners might have a home they inherited, and it’s owned free and clear and they don’t want to bother with any kind of financing. They just want it rented out with money coming in. Other investors want to be leveraged. They can put down a percentage like 10 or 20 percent of the purchase price, and use other people’s money to get the appreciation. If you buy a $200,000 home, and that property goes up 10 percent over 2 or 3 years, you’re earning a $20,000 return. If it was financed with 20 percent down, you just made $20,000 with your $40,000 investment. So, you can use other people’s money to get a higher return.
Set Investment Guidelines
Set your guidelines for investments. Decide what you’re comfortable with, and go in that direction. If you only want single family homes, that’s a guideline. If you don’t want houses with pools, stay away from those. Some investors don’t want to buy condos and properties with an HOA. Think about your guidelines and stick to them.
Do the Math
Do the math on how you can accomplish your goals. If your goal is to pay for college but your child also wants to go to graduate school, you may need more than one
property. Figure out how many you’ll need to make it happen. If you’re depreciating a property at $10,000 a year and your income is $100,000 per year, then you need 10 ties to shelter all your income at $10,000 a piece.
A Phoenix property management company can help you organize and analyze your investment plans. Once you have done all this, you have to stick to your principles and remember what you are investing for. It requires a constant review.
Investing in real estate doesn’t allow you to get rich quickly, it’s a steady accumulation of wealth. If you have any questions about investing or property management in Phoenix, please contact us at Service Star Realty.