“In order to get rich, you need to find something that not a lot of other people know about or have the ability to do.-Peter Lynch
Investing in real estate can be an extremely lucrative proposition, but it’s important to remember that like any major investment, there is always some level of risk involved. Investing in real estate means tying up a significant amount of money and resources into a single project. This can make investors feel vulnerable and overwhelmed by the risks involved. But if you do your research and find the right properties at the right price, investing in real estate can earn you big returns without too much work or trouble.
The key to “real estate” is that it really does involve more than just one thing; while some people may limit their understanding of it to buying homes, apartments, office space or other commercial buildings for their own (or even to rent out), there are a great many ways to make money in real estate, and it’s important that you familiarize yourself with all of them. If you have been looking into investing in real estate, chances are you have probably seen a number of stories about individual investors who lost a ton of money. Therefore, investing in real estate can be a risky business, and it is common for beginners who start out by putting all their eggs in one basket to lose their entire initial investment. If this sounds like you, here are some easy steps to follow on how to invest in real estate without losing money.
1. Put 20% down when investing in real estate.
When you put 20% down on anything, you will be much less likely to lose money than if you did not put any money down at all. I know this may sound obvious, but people who don’t have cash to invest tend to take out mortgages for 100 percent of the value of the property, and it’s a recipe for disaster. What mortgage lenders fail to tell them is that the bank expects renters to pay off that full amount in time, or it falls into default and can lead to foreclosure. At best, they break even; at worst, they lose everything.
2. Understand your market.
Know what types of tenants are in demand in your area. If you don’t know what people want to rent, then how can you know if your property is a good investment? The best way I’ve found to start this process is by using Craigslist and looking at the ads for rental properties in my area. Once you see some trends, see what properties are renting for and ask yourself: “Why would someone rent there?” Make a list of the amenities they’re looking for and try to make sure your rental has everything potential renters seem to want.
3. Know where prices are going.
Everybody wants to make money right away, but the key is patience…to wait until the market is right. The only way you can do that is by staying on top of what’s happening to prices in your area. The best way to do this is to use free mobile apps that display housing values in your area,, which allow you to look at trends over time. That helps you learn about how long it takes properties to recover after a downturn and whether now might be a good time to sell this one… or another year could make it even more valuable.
4. Don’t rush into upgrades.
One common mistake new investors make is upgrading their rentals too early, without knowing if they’ll be able to find renters who can pay enough to cover the cost of renovations. Here’s an example: if you need to spend $20,000 to fix up a two bedroom apartment before you can rent it at market rental rates, but it only costs you $2,000 per month to pay off that mortgage, then it will take you five months just for your upgrades to start turning a profit. If they’re good renovations and you think they’ll be worth it in the end, then go ahead
5. Finally, remember this rule:
“You don’t make money when you buy; you make money when you sell.” Many investors try to shortcut things and think that the key to making big money is by finding great deals and doing great renovations. The reality is that’s just an entry fee. That $20,000 you spent on a rental property could be earning you interest in the bank if you hadn’t sunk it into an investment like this. You make your money when you sell the property at a much higher price than what you paid for it. There’s no sense in dropping $20,000 into something and hoping it will go up in value over time unless you plan on keeping it as long as possible (which isn’t always a bad idea).
6. Expert Help
In order to get all of these tips spot on, it is highly recommended that you seek expert advice from real estate agents who have been doing this for years and have an understanding of how certain markets operate.
I hope these steps help if you follow these steps, investing in properties without losing money should be easy!