How To Start Investing In Real Estate

1.) Credit

Before you begin your investment journey you have to ensure your credit is where it needs to be. Most lenders will work with a credit score above 640+. IF your credit needs work, I have a solution for you. Piggybacking. Seriously. You're probably asking yourself what this means. Let me elaborate. Piggybacking is when someone else (with a higher credit score) makes you an authorized user on their credit account, preferably the account with the best credit history. By doing this your credit score will practically absorb the other person's credit history, thus increasing your credit score over the next cycle. Making you an authorized user does not mean you get access to their credit card, it just gives you access to their credit history. There is a slight risk involved; If the person that's giving you access to their credit history starts to make late payments on that specific account, it will negatively hurt your credit score. Piggybacking should only be done with someone you trust. 

2.) Investment Strategy  

Let's go over 4 different types.

A.) Home Ownership: Investing in a home is a long term play. Paying down your interest and principal over the years will allow you to create equity. Equity can play a huge role in your retirement and even give you the opportunity to reinvest elsewhere. Some investors dislike this approach because of the amount of time it takes to pay off a house, however, I believe in paying yourself first, not the landlord. Why spend money making someone else wealthy? 

B.) Rental Properties: Rental properties are awesome. These assets can provide you with a passive income that can eventually pay for your luxuries. The key here is to find a property that can provide rent that is higher than your mortgage payment, thus creating a positive cash flow (cash flow basically refers to the amount of money left over AFTER paying your mortgage, HOA, property management, etc). One way to get into rental properties is by utilizing an FHA loan. This type of loan gives you the option of putting down the bare minimum (3.5% down) rather than putting down 20% for an investment property. The only catch is that you HAVE to live in the home for at least 1 year before purchasing your second rental property. It pretty much rinse and repeat.

C.) Fix and Flips: Many investors LOVE flipping properties. Essentially you want to look for undervalued homes to remodel. Make sure you do your homework before pulling the trigger. You want to ensure that the property you purchase has enough equity so that you make a decent profit. As Robert Kiyosaki would say, "smart investors make money upfront". Fix and flips are a great way to make money FAST, just don't over-improve the property. 

D.) REIT's (Real Estate Investment Trusts): These are companies that own, and in most cases operates, income-producing real estate. REITs own many types of commercial real estate, ranging from office and apartment buildings to warehouses, hospitals, shopping centers, etc. REITs offer consumers the opportunity to invest in these projects while enjoying the benefits of monthly income and appreciation potential. Just make sure to read the fine print as most companies have holding periods.

3.) Find The Right Agent

You want to find a real estate agent that knows the market, knows about pocket listings, has connections to contractors, etc. The right agent can bring you the right deal. You can always look for homes yourself, however, do not make the mistake of purchasing a property on your own. A good agent will help you calculate the cap rate, provide you with the right disclosures, recommend great home inspectors, etc. 

I hope you enjoyed the write-up. It's going to be the first of many.