If you’re looking to diversify your portfolio, it’s time to consider investing in real estate. Real estate offers many benefits, if done right. Sure, not every aspect of being a landlord is great, such as waking up in the middle of the night to deal with a broken pipe or having nightmare tenants. However, with the proper measures taken, you can begin earning passive income without much effort.
To begin investing in real estate, take a look at these steps below.
1. Find a rental property
You can’t make money off of real estate if you have no property to rent out. Your first line of business when it comes to investing in real estate is finding a rental property. There are numerous avenues you can take when it comes to rental property. Do you want to rent out commercial property? How about an apartment complex? Or, are you interested in fix-and-flip projects? Whatever the case may be, find a realtor, and look online for potential properties you think will bring in money.
2. Secure financing
The next step to investing in real estate is securing financing. Purchasing a new rental property or even commercial building will cost a lot of money, and if you’re like most people, you most likely don’t have enough money to buy the property upfront.
There are plenty of ways you can finance your new real estate endeavor. The traditional route is through a loan. Personal loans, commercial residential real estate loans, and investment property mortgages are just some of the types of loans you can take out to receive funding for your rental property. Another option is going to a hard money lender. For example, if you’re in the Grand Canyon State, you can look for hard money lenders in Arizona. Hard money loans are best for those who have a weak credit score, as these loans use your assets as collateral.
Another option for funding is crowdfunding. Crowdfunding is a form of crowdsourcing where you receive money from a variety of people online. On websites like Kickstarter, you’ll post information on your project or business venture and ask people for donations.
3. Prepare your property
Once you have funding and bought your rental property, it’s time to get it ready for tenants. If your rental property is newer and doesn’t need any refurbishing, you may be good to rent it right away. However, if you’re flipping a house, you’re going to need to take some time to bring it up to par.
When flipping a house, you want to make smart renovations. However, you’re going to need to stick to a budget to ensure you’re making a profit on your property. Rather than going for trendy light fixtures and glossy hardwood floors, go the practical route with cheaper fixtures that still look great but are a fraction of the cost.
Areas you should focus on are the kitchen and bathrooms, as these two areas are the selling point of homes. Having a beautiful kitchen will allow you to charge more for rent per month, compared to a property with an outdated kitchen. This means buying state-of-the-art appliances, installing a clean granite countertop, and adding fresh coats of paint throughout the house.
4. Look for tenants
Now that your property’s ready to become a home, it’s time to look for tenants. After all of your hard work securing financing, finding a property, and updating it, you don’t want an irresponsible tenant damaging your rental. This is why it’s essential you conduct a thorough tenant search to find the perfect match—just make sure you’re complying with local, state, and federal laws.
When looking for tenants, post your property online! In no time, you’ll have applications coming in your mailbox. When reviewing tenants, it’s best to conduct a background check. A background check will give you information on their rental history, credit history, criminal history, and employment history.
Things to look out for are tenants with low scores in any of these areas. If they have a poor credit score, it could mean they might not pay you back in time. The same goes if they’re unemployed or switch from job to job. It’s also important to make sure your tenants come with renter’s insurance, just in case anything were to happen to their belongings on your property.
Sit back and relax
Once you’ve signed your tenants, it’s time to sit back and watch your bank account grow. Investing in real estate is a great way to earn passive income. The hardest part is dipping your toes into the market, but once you’re in, you’ll be on your way to a lucrative investment.
