How to Start Out in Real Estate Now
Year after year you watch more people make real estate deals and bring in major money. News and business sites cover their stories of greatness and you wonder why that can’t be you? Well for starters, you do not have millions of dollars to invest. Another problem is that you do not even know how to start out in real estate to invest your hard-earned money.
How does someone between the ages of 20-40 who makes less than $100,000 invest in real estate in Florida? One way to start is with rentals. Your goal isn’t to buy a property, flip it and sell it for a profit. That might cost too much money for you right now and also have many risks and pitfalls you can’t afford on your budget perhaps. You also will have to deal with the challenges of getting all that work done in a short period of time. However, if you were to purchase a property in good shape, and rent it out, you wouldn’t have to worry about high monthly costs, and you can hang onto the property for a long time. Think of a very simplified breakdown like this when learning how to start out in real estate:
Flipping: You buy the house for $200,000 and invest $50,000 to fix it up. You sell it for a total of $300,000, giving you a profit of $50,000, not including taxes, fees, commissions, etc.
Renting: You buy a house for $250,000 and rent it out for five years at $2,300 a month. The rent covers your mortgage, taxes and insurance payments which is around $1,700, and you have a bit left over for maintenance costs. After five years the house is worth $300,000 but your profit on it if you sell at this time is actually closer to $50,000 when you include the monthly rental cashflow.
If you hold onto the property longer and pay it off in 15-20 years, you now have steady significant monthly income coming in and you paid the mortgage off on the house without a dime coming out of your pocket. This is how smart people invest in real estate. Smart decisions, patience and realistic expectations.
Another great way for beginners to learn how to start out in real estate is with what is called “Wholesaling”. This is the practice of finding distressed property sellers and negotiating a deal that makes the property irresistible to a cash buyer. There are a few ways to wholesale properties, and it’s a bit more complex than can be explained in this article which is why we included a step by step E-Book on our website that tells you in detail how to wholesale. The simplest explanation of it is you as the wholesaler find a property the seller is willing to sell to you for $100,000 and then you find a buyer that is willing to buy that house for $120,000. You then sell your interest in buying the property, the contract to purchase to the buyer for $20,000. The Seller gets the agreed upon sale price, the buyer gets his deal, and you keep the difference. Best part of it is you the wholesaler never have to put any money down or pay for any properties. It’s a simple process, but not easy to do and you have to take the time to educate yourself to do well as with any new venture.