Property investing is a time tested method for building wealth. However, this is not the industry for those that are looking for fast cash. Real estate investing requires patience, knowledge, connections and a keen eye. Below are some additional, fundamental things that investors should know.
Location Is More Important Than The Property
Before investing in a property, property investors should study the area to determine the best and worst locations. While it is possible to make money in bad areas, this is only for investors who are experienced. Those who are new to the industry should stick to areas which are good. In other words, a nice single family property that is located in a crime ridden area won’t be a good investment because few tenants will risk living there. A good location, by contrast, is a house located close to a college or university, which will have a steady stream of college students looking for a place close to their school.
Don’t Necessarily Have To Be Rich To Invest
Many real estate books and gurus claim that you can get started investing with very little money, but this should be taken with a grain of salt. The reality is that depending on where investors want to buy a property, they will in fact need substantial amounts of money up front or connections to get started. A single family home on the East or West coast of the U.S. these days can easily cost close to $1 million or more and few people can pay all that in cash without financing.
Banks, for their part, prefer people that already have excellent credit and large sums of money to invest. Regardless of how many real estate books are read or how much knowledge investors have, banks won’t give them the time of day if the credit is poor or when they don’t have the tens or hundreds of thousands of dollars up front needed to get started.
Many homeowners who are paying a mortgage will rent out a room to help them pay it, and if you happen to meet someone with deep pockets and are willing to do the leg work, they may provide you the funds for investment, but getting into the property business, especially if you intend on acquiring a larger property such as an apartment, requires money and or connections.
Dedicate A Significant Amount Of Effort
Real estate should not be treated as a hobby or “side gig.” It is competitive, and anyone who is serious should be willing to dedicate their life to it, otherwise it’s just a waste of time. Even if investors are able to acquire a property from scratch, don’t expect an overnight windfall. Instead, they will need to spend years, likely decades, gradually building up their income until they receive a return on the initial investment. So while it is possible to make money in this business, it is also pertinent that investors make it the focus of their lives.