Where I’m Coming From
I’ve been in the real estate business for a little over 8 months, and I absolutely love it. My family has been in the business for much longer than that (my dad’s been doing this for over 30 years), and it was something that had always interested me. When I finally decided to go out on my own, it was like a dream come true. That said, there are some things you need to know before you dive into real estate investing full-time. This will hopefully help provide a new investor with some insight on what they can expect if they decide to pursue real estate as their main line of income. If this is something you’re considering, here’s all you need to know about becoming a successful full-time real estate investor!
What You Need To Get Started
The first thing any new investor needs is money! Yes, this might seem obvious but there are other factors that you will need beyond money — we’ll get into those later — but at the end of the day: if you don’t have any money how can anyone expect that you’re going to be able to buy anything? And when I say “money” what exactly do I mean? That depends on what type of investment property or properties you plan on buying. I am renting a house right now, and the rent that I’m collecting covers my mortgage payment, so I have no mortgage on this property. However, if you are looking to purchase a rental property with a conventional loan then there are definitely some things that you need to know about first.
In addition to the “money” part of being able to buy something, you also need a plan. This might seem like it should go without saying but let me explain: If you don’t know exactly what it is that you want (location boundaries, number of bedrooms/bathrooms etc.) then how can anyone expect for them to help provide that? Remember this: You’re not buying real estate for someone else — You’re buying real estate for YOU! So make sure your needs are met before jumping into anything too quickly.
The Mortgage Process
Now we’ve got the money and we’ve got our plan (or at least have decided on an overall direction), so now we need to get approved for a loan! Most banks or credit unions will not approve loans over $417k because in most cases this is considered jumbo lending and these institutions typically don’t handle jumbo loans. So if you want something higher than $417k they’ll likely refer you out — usually somewhere like Quicken Loans or Freedom Mortgage where they’ll still be able to service your loan while getting paid more money in interest from having a higher balance amount.
Once you’ve got your loan in place, then it’s time to find a property! This part can be pretty stressful because there are so many different factors that you need to take into consideration. The good news is that I’ll be covering this in another post (I may have covered this topic before, but I’ll do my best to make sure I don’t repeat myself), so stay tuned for that! After finding the property of your dreams, then it’s time for the next phase — inspections and due diligence.
What You Need To Do Before Buying Anything
This is where most new investors fall short. Most people think they’re ready — they know what they want, how much money they can get from their bank and/or credit union, where exactly it is that they want to buy… So now it’s time to run with it right? Wrong! In fact if you skip over this part entirely or try and push through without fully understanding what “due diligence” means then chances are you’re going to end up losing some money (or worse). This next section might seem like common sense but remember: not everyone knows what due diligence actually entails. And when we say “due diligence” we mean engaging in professional research on a potential investment property by performing background checks on both the tenant as well as the previous owner(s) of record.
As I said before this is not a step-by-step guide, so if you’re looking for such a thing you’re in the wrong place. What I wanted to accomplish with this piece is to set the stage for what it’s like to be a full-time real estate investor. As mentioned before: there are many different things that come into play when trying to become and then remain successful in this business, but hopefully if you read through this post it will give you some insight on what exactly goes into becoming one (at least at first).
I know that there are many other factors that go into becoming successful as a full time investor, but these are just some of the main things that stick out in my mind as being most important. If something was left out or feel like it needs more explanation please feel free to leave comments below!