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Is real estate investing one of your New Year Resolutions? If so, here are some tips on how to start and do it right.
- Buy & hold strategy. Unless you have solid real estate expertise and deep pockets, stay away from the riskier investment strategy of flipping homes.
- 4 Returns on investment. Rent (cash flow), principal reduction (equity), leveraged appreciation, and depreciation (tax savings).
- It is all about the numbers. Buy only break-even or cash flow positive properties, buy quality (reduced maintenance/rehab costs), and pay attention to location as they relate to current and projected rental rates (steady or growing), vacancy rates (5% or less), and local employment (steady or growing).
- Sources of down payment. Savings, stock market, retirement account, 1031 exchange, refinance an existing investment property, equity line of credit on a personal residence.
- Learn about the industry. The most successful investors take the time to learn about the local market, issues, trends, strategies, laws, etc. I highly recommend the Rental Housing Association of WA as a great starting point (rhawa.org). If you don’t have much time for this, then make sure your team of experts provides you with regular updates.
- Build your team of experts. Start with a Real Estate Broker with local expertise and their expert team of lenders, contractors and property managers.
- Have fun!
