You know that there’s some risk involved with any type of investing, but some investments feel a bit safer than others. For instance, the stock market is generally at the whim of consumer reaction, but you can usually trust the people running the companies you invest in are doing their best to increase profits.
For many people, real estate investing feels scarier because a lot is resting on your shoulders. The investment requires larger amounts of start-up capital, and the choices you make in purchasing your property will affect your chances of success.
If you can set aside the fears you have about investing in real estate, you’ll find that there’s a greater chance for growth. Read on to learn what you can do to feel more confident about investing.
The Big Investment
The biggest thing most people fret over how much money you need for the down payment on an investment property. Typically, you need at least 20 percent for the down payment on the property, which can easily mean that you need more than $50,000 in cash just to get started.
That’s a lot of money.
However, you have to remember that when you’re using that money to purchase a property, you’re putting the money into a tangible asset (AKA brick & mortar). You could invest $50,000 into the volatile stock market and experience big losses from day one.
Even if your real estate investment turns out to be more than you can handle, it’s still a low-risk investment and you’ll be able to, at the very least, recoup the costs (and most actually make money) when you sell the property.
Choosing the Right Property
If your property is always occupied, you’ll have no problem generating the cash flow you’ve been dreaming about. Keeping it occupied is part of your job as a real estate investor, and that can make people nervous. What if people aren’t interested in your home?
To get over this challenge, think carefully about what type of property to buy. Typically, landlords have a harder time renting homes that need some fixing up or that are located in an inconvenient location. Think carefully about the types of features tenants are looking for in their home when you’re evaluating potential properties.
If you want to lower your risk, focus on buying brand-new properties, you can be certain you’ll always have people who want to rent!
New build homes have stylish and modern features that older buildings simply don’t have. They’re also located in brand-new communities with amenities like walking trails and are close to shops and major roadways. This type of home is a huge step above the traditional rental unit that sometimes, you can get a bit more for rent.
Lack of Experience
Real estate is, for the most part, a hands-on investment. You’ll play an active role in selecting your properties, and unless you’re working with a property manager, you’ll be taking on the role of landlord. This is a lot of responsibility, and some people don’t feel like they’re prepared for all the extra work.
Fortunately, there are solutions to this! If you are a little hesitant and want to work your way up slowly, you can start small. Purchase a family home you plan to live in, with an income suite in the basement or over the garage. Since you’re living in the home, it feels less taxing. Once you see how easy it is, you can move forward with your next property.
Alternatively, you can hire a property management company to take care of all the details. They’ll screen tenants and handle maintenance issues, then simply cut you a cheque once a month. This can cut into your profits a bit, but it makes the process easier on you and reduces your time involvement substantially.
Building Your Empire
People who are wanting to invest in real estate have big plans for their financial future. They’ve heard about how this is an excellent way to earn some passive income! However, once you crunch the numbers, you might see you need to own a few properties before you’ll be able to quit your day job.
Sometimes, that feels daunting.
You don’t need to do it all at once! What’s nice about real estate investing is you make the initial down payment and buy your first property, but then you can start saving and planning the down payment for the next one.
In no time at all, you'll have enough money for your second property. Then you’ll have double the income and return on investment, and the possibilities for buying more properties and earning more money really start to snowball.
We hope that this article has helped you to see that the typical fears about real estate investing aren’t nearly as bad as they seem. It's normal to be a little cautious about getting started. At TriUrban, we specialize in working with both experienced real estate investors and people who are new to the game, just like you. Give us a call to see how easy it can be to get started in real estate investing.