When you have your eyes on a real estate empire, you know that you have to start somewhere – and that’s right here. Before you start buying rental properties and working on your future fortune, check out the basics of getting started investing in real estate.
Getting Started Investing in Real Estate
First things first: Learn everything you can about buying and selling properties, being a landlord and being a property manager. You should scour real estate investing blogs (like this one) to gather all the information you can, and you should talk to a Silicon Valley multifamily property expert to learn about the local market.
The bottom line is that the more you know, the more comfortable you’ll be when you make your first investment – and the more likely you are to make sound choices that earn you money.
As you’re learning, you’ll want to pick an investment strategy that works for you. Some of the most common real estate investment strategies for people getting started investing in real estate include:
- Long-term buy and hold. This means you purchase a property, find tenants, and rent it out for a long time.
- Short-term buy and hold. If you buy a property that needs a little love, you may want to make repairs, find a tenant and sell the property after just a few years (at a higher price than you paid, of course).
- Wholesaling. In wholesaling, you make a deal with a seller for a home that needs work. Then, you find a buyer who’s willing to pay more for the house.
- Flipping. House-flipping is popular on television, but it’s not quite as easy as it looks. You buy a property that needs work, make repairs (sometimes totaling tens of thousands of dollars) and sell it at a higher price.
- Buy, Rehab, Rent and Refinance, or BRRR. This strategy is a lot like house-flipping, but you don’t sell the home. You rent it to a tenant and then refinance it to get more funds.
Finding Your First Property When You’re Getting Started Investing in Real Estate
Finding your first property is a lot of fun, especially when you work with an investment property expert who knows how to find you exactly what you’re looking for. You can also ask your REALTOR® about off-market properties and listings that are coming soon.
Making Your First Investment Purchase
Your REALTOR will walk you through every aspect of your transaction, and she’ll be there to answer your questions every step of the way. After your deal is closed, you’re free to kick off your investment strategy. For example, if you’ve chosen to do a long-term buy and hold strategy, you’ll hire a property manager who will find tenants for you (or act as your own property manager and find them yourself).
The Smart Way to Grow an Empire When You Start Investing in Real Estate
Most people swear that the best way to grow an empire from a single property is to set aside a portion of your profits each month to invest in a new property. You might also choose to use the funds from rental income and the profits from the sale of the property, or you may want to use funds you get when you refinance the property down the road to invest in a more lucrative property.
Related: What’s a cap rate?
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