People ask me how to get into real estate investing all the time, and there are a lot of different ways to do it. Some people inherit a piece of property and others purchase a property. Today, we’re talking to those who want to purchase their investment.

How to Become a Real Estate Investor

First, you have to save a lot of money. Save those pennies, and make sure you have a large enough down payment when you want to purchase a piece of real estate. You want at least 20 percent to put down so you won’t have Private Mortgage Insurance (PMI) to consider. That reduces your cost of ownership.

Risk and Property Type

Consider your risk tolerance as well. If you’re going to have a large enough sum to put down, consider buying a multifamily property rather than a single family property. You can often purchase a duplex for the same price as a single family home. It offers you additional financial protection. If a tenant moves out of a single family home, you’ll need to have enough money to cover the turnover expenses and the cost of ownership. But, with a duplex or a triplex or a fourplex, you have other income during that vacancy that at least covers the cost of the property. There’s not as much pressure with the money going out, and you have time to find the best next tenant.

How to Invest in Property

Maintenance costs should be low. New investors tend to see something a bit run down, with a lower initial cost, and they think it looks good. But, that’s a big red flag. You never know what you’re getting into, and you may not have a lot of money saved to cover the extra maintenance costs. That’s why I recommend that you save money before investing; you’ll need it for both the down payment and the maintenance and ownership costs.

If the maintenance is going to be a big cost, make sure you have it calculated into your budget when you consider purchasing a property. Look at ownership costs versus revenue. If you’re going to be mortgaged to a larger sum and you’re putting money out every month, make sure you can cover your cost of ownership and maintenance.

Location, Location, Location

Top view of a real estate properties in Merced CountyFinally, look at location. We always talk about this. If you’re managing yourself, you’ll want a property that’s close to you. You may have an easier time getting into a property that’s further away from you; those areas may extend a better opportunity of ownership. But, you’ll have an additional cost with property management services.

These tips will lead you towards the best way to invest in property. For other tips, please contact us at New Bridge Management. We’d be happy to tell you more about how to get into real estate, and help you with Merced property management.