5 Considerations for First Time Real Estate Investors

Real estate investors are playing a vital role in rebuilding our economy. Investors help put abandoned properties back into circulation and provide needed housing. New investors are vital to the long-term success of the real estate market, so what should you consider before starting?

1. Flip Properties or Become a Landlord?

Flip Real Estate Property

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Investors who flip properties have different considerations than those who rent. If you become a landlord, you’ll need to decide whether you’ll manage those properties yourself or hire a property manager. Property managers are pricey, but if you’re working a full-time job you may not have time to deal with advertising, screening renters and dealing with maintenance issues.

Investors who flip properties don’t have to worry about keeping the property rented, but must determine how easy it will be to resell the property for a profit. Flipping houses is only profitable when you buy it cheap enough to complete renovations and still resell the property at a profit. With labor and material costs rising, this can be challenging.

2. How Much Can You Manage?

Manage Real Estate Property

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It’s important to be realistic about how much you can take on. Always overestimate how much money it will take to renovate a property and underestimate how much you can sell the property for. Decide how much cash you have for a down payment and monthly payments until the property rents or flips. Never assume that renovations are going to go as planned – always over budget for labor and materials and the time it will take to complete the project.

3. What Types of Properties Should You Invest In?

Real Estate Investment Property

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Do you prefer working with single-family dwellings? Would condos or townhouses be more up your alley? What areas of town are you interested in investing in – a great school district or a community close to downtown? Specializing is important because each of these types of investments come with their own learning curve.

Once you’re used to the process of buying certain properties, you’ll know the ins and outs well enough to recognize a good deal or avoid a potential disaster. Limiting your real estate investments to a single area of town allows you to identify the selling points and pitfalls there.

4. How Will You Manage the Process?

Processing Real Estate Property

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Real estate investing is labor intensive. A lot of work goes into the valuation of properties, finding motivated sellers, filling out contracts and other aspects of buying properties. However, there is software available to help. Consider a real estate software package such as FreedomSoft that allows you to manage all aspects of the buying (or selling) process with a single package rather than buying multiple packages – or worse – doing it the old-fashioned way.

5. Going Solo or Joining a Network?

Real Estate Investment Network

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Seasoned real estate investors are a gold mine of information for new investors. Join your local network of real estate investors and get involved with the group. Invite members to lunch and pick their brains. There’s no reason to make costly mistakes that some sound advice could prevent.

Lastly, have patience. Real estate investing is profitable, it just takes some knowledge, wisdom, prudence and time. The profits do come, and you’re contributing to the economic recovery in the meantime. It’s a win-win for everyone.

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