Real estate is profitable, lucrative and gives way to financial stability. At the same time, it’s tricky! There are many ways to start investing in real estate. It all depends on what your goals are and how much time you are willing to put in! Before you start investing in real estate, you need to prepare yourself. Here are some points to think about:
- Why do you want to invest in Real Estate?
- How much liquid do you have?
- How is your credit score?
You need to identify what you want. Then create a plan around trying to accomplish it.
HOW IS YOUR CREDIT SCORE?
Oh Credit. It can be a touchy subject for some. Having poor credit can dictate your ability to begin investing in real estate. Although there are options for credit scores as low as 580. It is good to work to have great credit, so that you can have many options to select from. If you do have poor credit, try to figure out ways to increase your credit. TIP* If you use credit cards a lot, practice not spending more than 30% of the credited amount, if you don’t do that already. Here is an option:
FHA- FEDERAL HOUSING ADMINISTRATION FOR REAL ESTATE INVESTMENT
- A loan option program for those with credit as low as 580. FHA allows those to invest with 3.5% down payment or 10% down payment for credit below 580.
- With such low down payment percentages, purchasing a Single Family or Four Family can be done with under 20K depending on the purchase price of the home.
- EXAMPLE: You are working with a Realtor who finds you a three-family selling for 400K. You have been pre-approved for FHA with 3.5% down payment. That means you need 14,000 to put down to purchase the home.
HOW MUCH MONEY DO YOU HAVE BEFORE YOU INVEST IN REAL ESTATE?
If you are trying to invest and use your own money into real estate, how much can you afford? Purchasing a property can get somewhat pricey as the fees begin to add up.
Here is an estimate of the typical cost:
- Down payment: 3.5%, 5%, 10% or 20% of Purchase price
- Earnest Money Deposit- Typically $1000
- Closing cost – Typically $4000-$7000
- Lawyer fees Typically $1000
- Major Property Issues $5,000-$10,000
After seeing all these costs are you financially able to invest in real estate and purchase a property. Do you have enough capital to put down 20% of the property price? These are things to figure out and think about when creating your plan. If you are thinking there’s no way you can afford to invest in real estate with all those initial costs- well there is still hope for you! After seeing all these costs are you financially able to purchase a property. Do you have enough capital to put down 20% of the property price? These are things to figure out and think about when creating your plan.
If you are thinking there’s no way you can afford to purchase a property with all those initial costs. Well there is still hope for you!
You may not have the money for a down payment as you plan to invest in real estate, but you know someone that does. Why not collaborate with this person and get the property together. Partnerships are a great way to begin investing in real estate with no money down! Be sure to collaborate with individuals that have an interest in investing in Real estate. In the first stages of establishing a partnership, discuss every aspect of the investment and who is doing what!
GET READY TO INVEST
Investing in Real Estate is a great way to make passive income and lead to the life you want! No matter how you decide to get started, just GET STARTED! There are so many ways beyond the ones I provided here! If you have enough to begin investing, you should get out there and get it done. Start talking to RE agents in your area to get started. Be prepared to speak with a Mortgage broker or loan officer who will start looking into your credit and financials to get you pre-approved for a loan.
Start with a plan of action by highlighting your goals, size of the property, credit and finances. Once you have identified an action plan write out the steps you need to take to accomplish purchasing an investment property!
Written By: Niara Ijezie