Who wants to be a millionaire?? I’m sure we all have heard of the famous game show, but a millionaire is something most people aspire to be. Did you know that majority of the world’s millionaires have reached millionaire status through some type of real estate investing? Here are some real estate investment ideas that can help you have a better understanding of what you might need to get started investing in real estate.
Real Estate Investment Ideas
Invest in Undervalued Real Estate – Real estate is just like buying stocks. The main rule in the stock market is to buy low and sell high. Make sure that you do your research when deciding on where you want to purchase. Whether be land or a foreclosed property, make sure its cheap and sitting in an upcoming area.
Underutilized Properties – When you purchase a property, do your research to make sure it is being used to its capacity. Just like anything in life, you want to make sure you can get the most for your money. Find areas that are being underutilized, and start thinking of creative ways of how you can make the most and bring in some income.
Think income, not appreciation – when investing in real estate, focus on what the property will bring you in income and not what it will appreciate in value. Let the property bring income to you in the present while it continues to increase in value for the future.
Use Partnership to Fill In the Gaps – This is one of the more important real estate investment ideas, especially when you are starting off. Not too many of us have the cash just lying around to invest a couple hundred thousand dollars in real estate. Why not partner up with someone to start off with? Once you get some income coming in, you can start to venture off and do some investing solo.
If you come across a great deal, such as cheap farm land or maybe a strip mall, that you might not know how to manage properly, find a partner that does. Just because you invest doesn’t mean you have to do the managing. Become a financial partner and still get a piece of the pie.
Macro is More Important Than Micro – One thing about real estate is that no matter how bad the economy is or how high-interest rates are, people will always need a place to live. Don’t worry about what is going on around your investment, worry about what you can do that will make this investment bring in valuable income.
To sum up all these real estate investment ideas, find a property that can bring in income and that is not being utilized to its capacity. Purchase the property and increase their operational efficiencies to maximize recurring revenue.
Real Estate Analysis Spreadsheets
- Opportunity Evaluator – helps evaluate multi-family properties, cash flow and projected cash flow, expenses, debt coverage and value.
- Residential Fix and Flip Analyzer – a spreadsheet where you can enter different values and projected expenses to determine profit.
- Work Order – submit to the contractor and in turn, he will give you a contract.
- Fix and Flip Checklist – this is a great spreadsheet to use when doing a walk through on a house.
- Zillow – a must have site in your favorites if you are investing in real estate. A free membership site that can give you access to inventory and also helps with estimating value of properties.
- Paralegal Plus – you will want to set up an LLC before you start purchasing properties. This is strictly for liability reasons. This service is limited to certain states.
- Legal Zoom – offers the same services as Paralegal Plus but you can use it nationwide. I prefer to use Legal Zoom.
- Residential Purchase Contract – used anytime you purchase real estate. Make adjustment based on the state and county that you are located in.
- Residential Lease Agreement – protects you, as the landlord, and gives clear instructions for tenants.
- Promissory Note and Deed of Trust – use when selling a property and you are giving seller financing.
- As the investor, you want to use this resource to help qualify tenants. There are many good resources to use for tenant screening.
Foreclosures and REO’s
- Foreclosures.com – the largest database for foreclosures, FSBOs, bank owned properties and tax liens.
- Realty Trac – they also have an extensive database of foreclosures.
Have a Sizable Down Payment – When it comes to real estate investing, mortgage insurance will not cover investment properties so you will need a minimum 20% down payment. The larger the down payment, you might be able to secure a better interest rate.
Be a “Strong Borrower” – There are many factors that can determine financing for a deal but among the most important would be having a strong credit score. This will have the greatest effect on your loan’s terms. A credit score of 740 seems to be the number that most lenders float around. Below 740 will start to cost you extra money for the same interest rate. The alternative is to pay a high-interest rate.
In addition to credit score, part of the lending equation is to have enough reserves in the bank for personal and investment related, at least 6 months worth.
Shy Away From the Big Banks – If you can’t make the sizable down payment as suggested earlier in the article, try your luck at a neighborhood bank. They will have more interest in the local market and have more interest in investing locally. They tend to have a little flexibility in the lending process.
Ask For Owner Financing – This used to draw up red flags for potential buyers because in the past, almost anyone could qualify for a loan. But now, with the strict stipulations for loans, owner financing is a common practice.
Think Outside the Box – If you want to get creative with ways of securing financing, consider securing the down payment through equity lines of credit, cash from credit cards or even life insurance policies. But make sure you do your research before committing to anything.
If investing is something that interests you, these real estate investing ideas will help get you started and point you in the right direction. Like any other business, it’s going to be slow when you are first getting started. But stick with it because it has its rewards.