Hands On Real Estate Investing

What to do? Create your own pension plan by investing in residential real estate!

Why invest in real estate? At the drop of a hat, Congress can affect your Social Security income, your Federal pension, and your private pension. At the snap of a finger, the value of your nest egg invested in the stock market can drop 50%. We witnessed this in 2008. Fortunately, monthly rental income is not subject to the whims of Congress or the stock market! Buying residential real estate can generate a dependable monthly income for you and your family. During the Great Recession, rental income continued to increase about 3% per year.

How to get started investing in residential real estate? Here are the steps for a beginner real estate investor:

1) Check your credit report and clean up any mistakes that negatively affect your FICO credit score. For more details on cleaning up your credit, click here.

(2) Save for a down payment. If you are a first time buyer, you can put down 3% of the purchase price. For more details on saving for a down payment, click here.

(3) Get familiar with the neighborhoods in your area. Typically, the quality of the schools drive demand. Are there employment centers within an hour’s drive? For more information on finding a good property, click here.

(4) Find a good Real Estate Agent who has experience working with beginner real estate investors. To learn more about finding a good Real Estate Agent, click here.

(5) Determine how much you can afford. Your Mortgage Broker will work with you to determine how much you can afford. Based on our experiences with Mortgage Brokers, it depends on your salary, assets, credit score, and how much you plan to put down. The lender will have requirements that you must meet, such as an amount of money in reserves to take care of vacancies, repairs, and upkeep. To find a good Mortgage Broker, ask your Real Estate Agent for at least 3 recommendations. Research their background and reputation by googling them (www.google.com). Call and/or meet with them to explain your goals. For more tips on obtaining a mortgage, click here.

(6) Once you determine how much you can afford, your Real Estate Agent can put you on an email distribution list to receive properties within your price range. Do drive by’s to check out the neighborhoods. Are they clean and well kept? Do the residents take care of their homes and yards? Does the neighborhood have “curb appeal,” in other words, is the neighborhood pleasing to the eye? For more details on how to find a good property, click here.

(7) Once you find a good property, make sure the numbers work. What do I mean? Make sure the potential rent covers the expenses. Your Real Estate Agent can retrieve details on rents for comparable properties, i.e., rent comps. Your Real Estate Agent can also retrieve details on the “sold” prices for comparable properties, i.e., sale comps. For tips on evaluating a potential real estate investment, click here.

(8) Make a Move! Once you have lined up your financing, and you feel confident that you have found a good property, and the numbers work, make a move! For tips on making an offer and negotiating a contract, click here. To learn more about obtaining financing, click here. To learn about settlement, click here. For 5 reasons to manage your own rental property, click here.

The opinions expressed herein are solely those of the Author/WebMaster. Before taking any action, please consult your real estate, financial, and legal advisors.