There are a variety of ways that millennials can start investing in real estate and many young people are taking different routes depending on their job situation, financial history, credit score, etc. However, there are several principles that every real estate investor should follow, no matter the route that they take—especially if they are new to investing. Here are a few ways that you can start preparing for your first real estate investment:
1. Work on your credit score
Investing in real estate is not something you can start doing overnight. There are some steps that you should take before you buy your first property such as having a good credit score. Fortunately, when it comes to hard money loans, your credit score isn’t as important as it may be if you were applying for a traditional loan. Hard money lenders generally look at the value of the property and not at the borrower’s finances or credit. However, paying off all of your loans and having a solid credit score will give you an advantage.
2. Save
There are plenty of ways to get financing for your real estate investment, but having proof of consistent saving will help when finding a lender. Successful investors start saving a certain amount from each paycheck that stays tucked away until their first purchase. Doing this will also teach you the value of your money and self-restraint. This can be difficult if you have student loans, but if you focus on paying off high-interest debts first, pay more than the minimum balance due and only spend money on the essentials, you will be able to pay off your loans much more quickly.
3. Don’t doubt yourself
Every investor has to start somewhere and you shouldn’t let your fear of failure get in your way. Failure is a part of life and it is a big part of investments. There are always risks, but if you do your research, you can help to minimize your risk and start making money. You will make mistakes, but you will learn from them. You may hear that voice in the back of your head telling you that you’re going to fail, but that doesn’t mean you have to believe it! The important thing is to just get out there and start investing and you’ll learn the rest along the way.
4. Start Networking
An important aspect of investing is getting to know the right people. Meeting with real estate agents, contractors and other investors will help you learn about the industry and you will make important contacts along the way. When it comes to real estate investing, you will want to have a solid team of people that you work with and you can start building that team before you start investing. There are plenty of real estate investment organizations, events and meet-ups all over the country and you can find them by searching online.
5. Follow your head
It’s easy to base your decisions on your heart instead of your head, especially when it comes to real estate. A property may look perfect on the outside but it may not be all it’s cracked up to be. Getting professional advice is always a smart move when it comes to buying property. An objective inspector will help you determine if the property is worth the money and effort. There are plenty of things beneath the surface of the property that may cost more money than you think. Get an inspector to help determine how much you will need to spend on the maintenance and repairs before you buy the property. After all, investments aren’t about gut feelings, emotions or following your heart—it’s all about doing the math.
6. Study the market
Speaking of math, that brings us to the last point. Buying, renovating and selling the house is the shortest and most exciting part of the investment. That’s just the tip of the iceberg. Before you even step foot on the property you plan to buy, you need to do your research. You can start by finding your target price range and seeing what homes in that range sell, how long they take to sell and how many times the price was reduced. You can do this by looking at home prices on websites like Redfin.com. When looking at the neighborhoods and real estate markets, here are just a few of the aspects to take into consideration: comps, public transportation, schools, etc. Planning and researching as much as you can will help to minimize risk and that means more money in the long-run.