Real estate investing is the purchase, ownership, management, rental and/or sale of the property for a profit. When purchasing an existing property (i.e., not new), real estate investing also includes rehabbing the property.
If you’re interested in learning about building long-term wealth by investing in real estate, this article will take you through the basic steps from purchasing a property to generating a profit.
#1 Purchase and Ownership
Investing in real estate begins with the purchase, and therefore ownership, of a property.
The three things that must be accomplished before the purchase include:
- Decide what type of property to purchase.
- Arrange for financing.
- Select the property.
Investors of residential properties have the option to invest in single-family and multifamily properties. We suggest that new real estate investors begin investing in single-family properties to learn the ropes, before jumping into more complex multi-family properties.
Around 75% of real estate investors finance their investment properties. Some of the financing options include a private loan, hard money loan, loan from a portfolio lender, a mortgage, and other traditional methods.
After deciding on the type of property in which to invest, and with the cash and financing in hand, it’s time to select a property that can produce a profit.
Factors to consider when selecting an investment property include the neighborhood, aesthetics, floor plan, appliances, curb appeal, yard, parking, and a host of other characteristics.
When investing in an existing property, investors typically rehab the property before selling it (flipping) or renting to tenants.
The rehab is where new investors make many of their biggest mistakes, often because of inexperience selling and leasing real estate, and because of ignorance concerning construction.
A property that is not rehabbed properly can result in the investor taking a loss that could last for years, especially with multifamily rental property.
Because the topic of rehabbing investment properties is so vast, here are two of our most important articles:
- Top 10 Things You Should Know About Rehabbing Investment Real Estate
- 5 Investment Property Rehabs That Devalue a House
Flipping real estate can generate quick profits for investors, which involves:
- Purchasing a property that makes for a good flip at a good price.
- Doing a good rehab at a good price.
- Selling the property for a good price.
Real estate investors who make a substantial mistake with any one of these three key processes are prone to lose money on the deal.
Again, because of the complexity of flipping houses, here are two of our best articles on this topic:
#4 Rental Properties
Besides flipping properties, real estate investors also hold properties that they lease to tenants, thus generating monthly revenue.
Investing in rental properties is a source of passive income by which rich families, like the Hilton’s and Rockefeller’s, generate wealth. Investment properties purchased by a single generation can supply cash flow and profits for generations to come, while also leaving a legacy that’s passed down through the ages.
Making a profit with rental properties involves:
- Purchasing a property that would make a good rental property at a good price.
- Doing a good rehab at a good price.
- Leasing the property to a tenant and managing the property.
To learn more about investing in rental properties, here are three of our best articles on this topic:
- Passive Income Generated with Rental Properties
- How to Pay for Your Kid’s College Education with Real Estate
- Funding Retirement With Rental Income
Both flips and rental properties require management while owned by the investor.
- Flips are managed for a couple of weeks to a few months.
- Rental properties are managed for as long as the investor owns the property, usually for years.
The management of investment properties directly impacts an investor’s bottom line and can mean the difference between generating a handsome profit or losing money, especially with rental properties.
Therefore, one of the best ways to ensure success as an investor is to use a professional property manager for rental properties. The management fee an investor pays a professional to manage the property, decreasing vacancies while also lowering costs, will generate more revenue in the long run. Plus, hiring a property management company allows investors to have a better quality of life, allowing them the freedom to travel and enjoy their wealth.
Learn more about property management with these two articles:
- Increase Your Real Estate Profits – Use A Property Management Company
- Which Real Estate Investors Need a Property Management Company?
Graystone Investment Group
Graystone Investment Group is an experienced real estate wholesaler in Tampa Bay. We serve clients who flip homes in as little as 30 days, as well as clients who hold high cash flowing rental properties.
Unlike other wholesaling groups, we provide clients with a turnkey process at no extra charge. We find properties that we resell to investors at discount prices, while also connecting them with private financing. We also coordinate with rehab and management companies we’ve worked with for years.