What You Should Know Before Investing in Real Estate

By Henry Reith, - In Money

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Let’s face it. You need real estate. If you’re looking for a new property for your small business, or you have money that you’d like to see grow, investing in real estate is the most viable option for you. You’re interested, but you don’t know where to start. With a little time and effort, and staying focused on your goals, you will become knowledgeable enough to make smart investments. Before investing in real estate, you should ask yourself the following questions.

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Why Am I Investing?

Try to figure out the exact reasons why you want to invest in real estate. Your small business is growing and you need to expand, or you don’t need as much space as you thought starting out. Whatever your intent, even if it’s just to turn a profit, make sure it’s always in mind as you search. You can get lost in the sea of properties out there, so having a clear goal will ultimately filter out distractions and help center your focus on what’s going to be a good fit for your next investment.

What Do I Want to Invest With?

No amount of planning and research will help you without the proper funding. Investments often require down payments, so compile all of your savings and assets in order to figure out where you’ll be drawing money. Your current funds as well as your credit will determine what kind of deals you should be on the lookout for. Don’t have all the money you’ll need? Don’t worry. Loans are great ways to get started, provided that you can get one. Get all of your documentation in order: make a budget, a projected expenses report, and a financing plan to look as professional as possible. If you have bad credit and just found a great deal, don’t be discouraged.  Sourcing local money loans, which are much more lenient in regards to your credit, can be approved incredibly fast and will get you the money you need.  Just make sure you’re aware of the higher interest rates and find a local lender who understands the market you’re investing in; if you’re in Northern California, use San Francisco or Sacramento hard money lenders. In Southern California? Opt for a Los Angeles or San Diego hard money lender.

Peer-to-peer lending can also be a great choice with platforms like Lending Club. Finally, talk to family members, friends, or other people who are important to you to see if they’ll cosign a loan with you.

Who Do I Want to Invest With?

Investing in real estate is more often than not a collaborative effort. More power to you if you’re going in alone, but having a friend, spouse, or family member to partner up with can make things a lot easier for you, especially if you don’t have amazing credit. The key is to work with people you trust on a financial level.  Set up ground rules regarding communication, or what types of decisions warrant a discussion first. There is a lot to be gained from investing in real estate, but keep in mind that some people have a lot more on the line than others.

Where Do I Want to Invest?

Real estate is all about location. The average price of properties can change dramatically between neighborhoods that are only a few blocks from one another. With your goal in mind, your price range figured out, and with the help of a comparative market analysis, you should be able to start narrowing down what areas are going to work better for you. Get intimate with the neighborhoods or blocks you’re interested in, and be the person who knows the most about all the different properties that could work for you. Knowing your niche is key.

When Do I Want to Invest?

There’s no time like the present. The market is always changing as new properties are put up or taken down, so it’s best to start as soon as possible so you can stay on top of the game. A potential investment that you think would be a great fit might disappear next week, so make sure to check up on your favorite listings frequently. All of this will become second nature to you as you familiarize yourself more and more with the areas you’re interested in.

Investing in real estate might seem daunting at first, but with dedication and research, you will become an expert before you know it.


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