3 Proven Ways to Build Generational Wealth - Part 2 - Real Estate Investing
Thinking about investing in property, even during this lockdown season? No problem! We have got together with Property Expert Katie Jones from Agape Investing to give a quick breakdown of how to start.
Investing in real estate can be an amazing way to build wealth, especially generational wealth. You may have heard stories of people making it big through real estate investing, but you also may have heard some horror stories of people failing at it as well. Everyone makes their own mistakes along the way, but if you educate yourself well, you can try to avoid making them.
This guide will help you to take off on the right foot when diving into real estate investing. That way, you won’t have to end up as another scary failure story. This guide will also help you get started in real estate investing with little capital.
Real estate investing doesn’t have to be only for those with a lot of money. If you are serious about building lasting wealth, real estate can be the right path for you too. It all begins with taking baby steps first.
What Is Real Estate Investing?
There are a lot of different ways to invest your money. Many people choose to put it in stocks, bonds, retirement accounts, mutual funds, or even in business start ups. With real estate investing, you are choosing to put some of your money towards real estate.
Real estate investing may sound very straight forward, but in real estate alone, there is a lot of diversification within the real estate world. Real estate investing is a very broad term.
Getting Started With Real Estate Investing With Little Capital
Step One: Get Educated
The first step in any area of investing is always education. There are a lot of ways to educate yourself about real estate investing. In fact, there are a lot of free ways to educate yourself, so try going the free route before buying any expensive courses.
Go to the library and get the most recent books on real estate investing. Start listening to podcasts on real estate investing. Take a real estate investor friend out for lunch and learn about what they do.
Step Two: Pick an Avenue to Take
As mentioned, real estate investing is a very broad term. There are so many avenues to take within real estate. The key is to pick an avenue and focus your learning specifically on that area. Here is a list of avenues you can take within real estate.
Avenues of Real Estate Investing
Single Family Rentals
Multi Family Rentals
Apartment Complexes
House Hacking
Land Development
Flipping
Hard Money Lending
Wholesaling
The list goes on and even branches off of each of these categories into many more. The key is to pick one and become an expert at it.
There is no need to reinvent the wheel. Find out what strategies work for other people and model your strategy after them.
Step Three: Learn Your Market
Before you can begin buying any real estate, you need to understand the ins and outs of the market you are investing in.
You may decide to invest in your own neighborhood, or even out of state. Wherever you decide to start investing be sure to become an expert on that market.
Ways to start learning your market
Attending open houses
Tracking houses online
Talking with real estate agents
Talking with property managers
Reading housing reports
Understanding home values and why they are valued that way is important. Building this skill will help you to spot deals before others see them.
Step Four: Run the Numbers
Once you have a better understanding of your market, it’s time to start running the numbers.
There are different methods of running numbers on real estate deals and the method you choose will be dependent on the avenue of real estate you are taking.
Let’s use single-family rental property investing as our example.
A simple formula that many investors begin with is the 1% rule. The 1% rule says that if the rental rate of a house is 1% of the purchase price, then it is probably a good deal.
For example if a house is valued at $200,000 and it can rent for at least $2,000, then it will probably be a good deal.
This is a very broad way to run the numbers, so you will need to dive deeper to find out exactly what the expenses are on the house before buying it. The 1% rule is mainly used to weed out houses as you look at them online.
Once you find something that fits the 1% rule, you can dive in deeper to see if it truly is a good deal or not.
Step 5: Raise the Capital
Once you have determined that a property is a good deal it’s time to find the capital to invest.
This might come from your savings account, from a business partner, a family member, a hard money lender, or even a bank.
If the property you found truly is a great deal, then you should have an easier time finding the capital to fund it. Be sure to factor in any costs associated with funding the deal like interest rates.
Final Thoughts
If you are looking to get started with real estate investing and don’t have the money yet to be able to invest, don’t let that stop you from taking action now. Start implementing these steps into your daily routine. When you find a killer deal, I’m positive you will be able to figure out the funding later.
Start taking action today and start investing in your future!
by Katie Jones
Katie is the Founder of Agape Investing where she writes on topics surrounding real estate, entrepreneurship, and finances all from a faith-based perspective. Katie worked as a leasing agent at a property management firm for 4 years where she learned the fundamentals of rental property investing. In 2018, she started investing in real estate with her husband, and they currently own 4 units. Katie graduated from Colorado Christian University, where she built up a passion for implementing her faith into her work. She enjoys teaching others how they can do the same in their own career fields.
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