7 Common Questions New Real Estate Investors Ask: The Answers You Need
If you're new to the world of real estate investing, there are likely a lot of questions swirling around in your head. What's the best way to get started? What are the risks involved? How do I find properties to invest in? Jacobs & Co. is here to help! In this blog post, we will answer some of the most common questions new investors ask. So if you're ready to take the plunge into real estate, read on for answers to some of your biggest questions!
Question #1: What's the best way & time to get started in real estate investing?
This is a great question! Real estate investing can be a very lucrative endeavor, but it's important to do your research and understand the risks involved before you jump in. Real estate is a tricky business. It can be very challenging to predict what the market will do, but there are a few important signs to watch that can help you determine the direction the market is moving.
Those indicators are:
Local market trends
In a nutshell, yes is always the answer. A good moment to invest is right now.
Any market swings that are currently taking place normally won't have an impact on an investment property in the long run if you are looking long term. The only exceptions to this guideline are if you're hoping to make a quick real estate investment or if the market undergoes a significant adjustment. Although it is hard to forecast the future, the real estate industry could be significantly and unexpectedly impacted by things like legislative changes, war, or financial crises.
There are a few different ways to get started in real estate investing, but one of the most popular methods is through fix-and-flip properties. This involves finding properties that need some work and then repairing and flipping them for a profit. Another option is to buy rental properties and generate income through monthly rent payments. Whichever method you choose, be sure to do your homework first so you know what you're getting into!
Question #2: What are some of the risks involved in real estate investing?
As with any investment, there are always risks involved. Before purchasing any property, do the math and make sure it’s something you can afford. You should be looking at potential profit margins, mortgage rates, and the average rental rates for the market you’re investing in. Regularly monitor your credit score and work on actively improving it if necessary. Estimate maintenance and management costs, and see how they fit in with your expenses and income.
When it comes to real estate investing, some of the biggest risks include the possibility of tenants damaging your property or not paying rent on time. There is also always the potential for your property value to decrease if the market takes a turn. However, if you do your research and invest in a solid property, the risks can be minimal. Real estate investing is definitely a riskier endeavor than putting your money into a savings account, but it can also lead to much higher returns!
You should always plan for the unexpected. Build an emergency fund that you can dip into in case of property or personal emergencies that will keep you covered without rocking the financial boat.
Question #3: How do I find properties to invest in?
There are a few different ways to find properties to invest in. You can search online listings, drive around looking for For Sale signs, or work with a real estate agent who specializes in investment properties. Once you find a few potential properties, be sure to do your due diligence and research the area before making an offer. You'll also want to get a home inspection to make sure there aren't any major problems with the property that could end up costing you more money than it's worth.
If your local market isn’t offering the investment opportunities you want, you might consider buying a property outside of where you live. This strategy can be lucrative, but there are hurdles to watch for.
Landlord-tenant laws vary from state to state and constantly change. You’ll also need to assemble a team to help you manage your property if you don’t plan on traveling regularly. That being said, looking for investment properties in what may be a more accessible market can provide fewer barriers to entry and help you diversify your portfolio.
Question #4: Should I Make Multiple Real Estate Investments?
To increase revenue and profit margins, you might think about expanding your real estate portfolio by purchasing additional properties. A bigger real estate portfolio diversifies your risk, offers greater tax advantages, and offers different revenue sources.
Before you invest in a second, third, fourth, or more home, I advise you to seriously consider paying down the debt on your current property. This is a more cautious approach, but it will safeguard you in the event of a market downturn. You might be able to skip this stage if you are convinced that your profits will exceed the interest on your present mortgage and related costs.
Assume that each additional property will be your sole source of income. According to your financial circumstances, consider your alternatives for obtaining additional finance, which range from conventional mortgages to private loans.
Question #5: Is Turn-key the Best Option?
“Turnkey” generally refers to a property for sale already in move-in condition. It may already be occupied by tenants or be ready for use without any repairs or renovations. A turnkey property can be a great investment because it often generates immediate cash flow with no initial outlay.
This is something I would advise, especially to novice investors. While acquiring a fixer-upper can be a terrific way to save money on the purchase price, vacancies can quickly ruin your profit margins.
Question #6: Should I purchase properties that already have tenants?
Sometimes the best rentals are ones that are already in use. Make no final decisions if you're looking to invest in a rental property until you know the screening procedure the existing owner underwent. Please don't assume that just because people are residing in a building, it means they are the right people to occupy the space. Get as much information and supporting documents about the present tenants from the current owner as you can.
Ask them what standards they utilized to select the tenants. What is the pattern of their rent payments? Are there any current agreements that you need to be aware of?
Question #7: Do I Need a Partner to Invest With?
It might be difficult to come up with the initial funding needed to pay for a down payment, realtor fees, closing charges, property taxes, home maintenance, and similar expenses. Many people decide to invest with a partner in order to reduce costs, as they may divide the costs and obligations of owning an investment property.
Good investments require analysis. One of the biggest reasons new investors lose money is because they set unrealistic real estate return rates. Make the effort to learn about the various rental property kinds and business options in your market.
Before taking any official action, if this is a course you're considering, draft a contract or written agreement. Clearly define tasks and obligations for each partner, segment finances, and spell out how assets will be safeguarded. You might decide that one successful investment property is all you need, or you might find yourself searching for the next investment.
Find a partner whose skill set is complementary to your own. Look for someone that thrives on maintenance, renovations, and repairs if you are excellent at the administrative side.
If you're thinking about getting into real estate investing, these are just a few of the questions you may have. However, don't let these questions deter you! Real estate investing can be a great way to generate income and build wealth over time. Do your research and work with experienced professionals to minimize the risks involved. With Jacobs & Co. by your side, we can help you navigate the world of real estate investing and find success! Contact us today to learn more.
JACOBS & CO. REAL ESTATE, LLC.
12923 Fitzwater Dr. Nokesville, VA 20155
(703) 594-3800 | jacobsandco.com