The Ultimate Step-by-Step Beginner's Guide to Investing in Real Estate
This roadmap will keep you on the path to achieving your real estate financial goals. Keep it handy, and use it to make money.
Boost Your Credit Score
When people ask us how high their credit scores should be, we say higher. There's no such thing as too high of a credit score, and having a high score reduces the amount of interest you'll have to pay a lender for borrowing money.
If your score is low, one of two things can happen. Either the bank will charge you a super high-interest rate, or they simply won't lend you money. Either of which you don't want happening to you! Boost your credit score, and boost it well in advance of looking at properties.
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Todd made a fantastic 15-minute video to accompany this article, check it out on his YouTube channel. As you watch the video, try to read through this article as an accompanying reference! Why reference one source of knowledge when you now have two!
Also, don't forget to destroy (like, comment, share, and subscribe) to the channel! It helps us give value to more people.
Also, also, check out Todd's other videos here!
Save The Down Payment
Save, save, save, save, save! most homes require down payments between 3.5% and 25% down. If you need help saving up for your down payment, try finding ways to boost your income by using cashback apps and secret shopping. These two ways are great to help you reduce your expenses so you can save more cash!
How do you invest in real estate with no money, no credit, and no job?
Try to avoid this, but it is possible using a hard money lender.
Show Proof Of Income
Proof of income is really important. Your tax return for the previous few years is even more important. Lenders are looking for you to make money legally to calculate a debt-to-income ratio. A debt-to-income (DTI) ratio is a metric that banks use to calculate the risk you are as a borrower. It's calculated by taking your monthly mandatory debt payments and dividing it by your gross income (before tax). The lower the DTI ratio, the better. Having a lower DTI gives you more breathing room in case of emergencies.
Get Pre-Approval Letters
Assuming you check all the boxes for the bank's point-of-view, they'll send you a pre-approval letter. This letter allows you to start shopping! It is a commitment from the bank that they are serious about lending you money and lets the real estate agents you will work with know you're serious about buying a property.
There is always additional due diligence that the bank will do before they actually lend you money so don't start racking up credit card debt or buy a new car between the time you get a pre-approval letter in your inbox and trying to close on a property.
Understand Your Market
Take some time to better understand the market you're buying in. Where you buy your property is extremely important for the future value of your precious investment. Hop on Google Maps, learn about the school districts, and check out the local government to learn what you're actually buying.
Try to identify areas where demand is likely to increase in the future. Look for areas with a lot of construction. If you're in a metropolitan area, count the construction cranes on the skyline. It might be worthwhile investing where the cranes are or are going to be in the future!
Remember location, location, location!
Make Offers
Here is the fun part, making offers. At this point, you've probability have seen so many property listings that you're basically a real estate professional now.
Having a great real estate agent during the offer stage is important. They will advocate for you to the selling agent and it's their job to help you get the best deal. No offense to real estate agents, but as a buyer, you should also be interested in getting the best deal for you. Do your due diligence and try to learn everything you can about the property and what it is worth. This is hard, but the more you know about something, the more likely you won't make a mistake!
Get An Inspection (Or Three)
Inspections are a great quick way to get a professional into your future property to let you know if anything might be wrong with the property. They are fairly cheap depending on the area the property is in, and if the property is large like a single-family home or larger, it's highly recommended!
Also, don't be afraid to get multiple inspections from different people. There's always a possibility that something was missed on the first inspection. Especially if you aren't well-versed in real estate construction, having an inspector get straight to the point on the health of the property is super, super important!
Close On The Property
Now we're getting somewhere! Closing on the property is a great milestone to strive to achieve. Once you close on your new property, you're basically a real estate investor (not quite) but we'll get there in a second. Buying a piece of property is an incredibly complex process, so congrats on the purchase of your first property! You can probably celebrate (just a little). The real celebration comes when you receive your first check from a tenant.
Do Any Renovations That Are Needed
If you don't have expertise in real estate construction, it's recommended to purchase a property that only needs light cosmetic renovations done to it. If you have little knowledge on how to remodel a piece of property and buy a highly distressed property, chances are high that your "investment" will end up costing you a fortune in the long run.
Try to work in your circle of competence, but still be on the edge of the circle, where you're pushing yourself out of your comfort zone! :D
Rent It Out!
Literally, life is complete at this point. Just kidding, you're officially a real estate investing now, and now you can get cracking on the next one. As DJ Khalid always says, "another one". That's what we tell everyone when they ask us how many properties we want!
Thanks For Reading!
We hope this article was really informative for you and helps you achieve your real estate goals. We'd love to hear your thoughts in the comments below on what you liked, wanted to learn, or even your success story!
Let us know how to help you more! Be sure to subscribe to get more updates from us. We truly appreciate your support! :D
P.S. Here's a glossary of some important terms discussed today!
Glossary
Destroy (YouTube) - The act of liking, commenting, sharing, and subscribing to a YouTube video and channel to gain favorable feedback from the Youtube gods!