Real Estate Investment Center
You become a real estate investor after you buy your first home. This is an investment and for most people the largest and only investment they will make in real estate. The difference between that person and someone that wants to continue to invest in properties and build a portfolio is having the guts, determination and desire. Real estate investors come in all shapes and sizes, and their areas of expertise can be very different. Some prefer residential while others prefer commercial.
Residential Investing
Residential is the first natural step for a new investor though many do graduate to commercial as they get more experience, confidence and the desire to increase the value of their portfolio exponentially. Residential is more forgiving and gives an investor more options if they have multiple strategies for each property they purchase. If the primary reason an investor purchases a home is to renovate and resell, that is a great plan if the market is strong and they can sell within several months at a profit. Multiple strategies come in to play in the event that the home cannot be sold for a profit , then that investor needs to be prepared to sell to another investor at a smaller profit, lease it out or if necessary move in. Each residential property an investor evaluates should be approached from the standpoint of can I make money on this property regardless of if I have to sell, lease or live in this property. In many cases leasing the property out for a year before selling is a great plan since selling in the first year you pay tax on the profit as regular income (25-35%) where as selling it after a year you pay long term capital gain on the profit which is just 15%. It is hard to make a terminal mistake in residential investing if you buy in a good area, at a fair price, with solid financing and have the property inspected to avoid major unforeseen repairs. It makes sense to work with a real estate broker to help you through the process, and if that broker is also an investor you can benefit from their experience. New investors can become disillusioned because they see more experienced investors with multiple properties and think they can never reach that success, or it will take too long. Investing is a process that if worked at consistently one can double the amount of units they have every few years.
The most important rule of real estate investing is to not feel desperate to sell or lease to the first person that comes along. It is better to have a vacancy than a bad tenant. Vacant units may not pay but they also do not tear your property up. While some just look to have additional assets after retirement, if real estate investing is handled properly, many are able to replace their income after several years and invest full time. Regardless of the approach you choose, there is nothing wrong with having a tenant make your mortgage payment for you while the property increases in value and hopefully throws off at least $200 per month in additional free cash flow.