A growing number of experts believe that recession is coming soon. And if you read last week’s blog post then you learned that in the Dallas/Fort Worth metroplex area, in the prime location of Frisco, Texas, the real estate market, which has been blazing hot for close to a decade, is currently slowing down despite all the advantages and amenities of the city.
On the other hand, Fed chairman, Jerome H. Howell, said earlier this year when they raised interest rates that they believe the economy is in great shape. They also shared that there will be 2 more interest rate hikes, making the cost of borrowing money go up.
This, naturally, slows down the sale of real estate and causes prices to drop. Though the Fed does not believe these interest rate increases will slow down the growth of the economy, the real estate economy is already slowing down in various places, such as Frisco, Texas.
All of this could mean a prime opportunity for you to acquire great rental properties selling at discounted prices as we move into 2019 and 2020.
So, let’s take a look at how to start investing in real estate in 2019.
Set Your Goals
Goal setting is the first and most important thing you must do before taking on any endeavor, and the same holds true for real estate investing in 2019.
You first identify which your long-term desire is concerning real estate investing. In other words, do you want it to comprise 100%, 50%, or 25% of your overall retirement nest egg. For the sake of diversification, it is best if you think in terms of 25% of your overall retirement nest egg, and a maximum.
Once you identify your overall goal then you can take into account the number of years you have to build up to the ultimate goal. Your ultimate goal should be a monthly income range that you hope to live on from the interest and income your investments produce.
For instance, taking into account inflation, you may feel that you can live very well on $80-$100,000 a year in retirement. This total amount main include Social Security, pension, income producing stock or mutual fund investments, and rental property income.
Obviously, you can live on even less or live like a king on this amount if you are 100% debt-free including your house by the time you retire. So then this is one in real estate to make up 25% of your overall portfolio for retirement, then you’re just looking at needing to build a real estate rental property portfolio that generates in net income of about $2500 a month.
Can anyone say, “Super easy?” This is a particularly simple goal to achieve if you have five years or more until retirement.
Once you have your overall goal in mind, you just need to decide how many properties you need to own, generating how much income per month, in order to be able to retire in X number of years.
Which is identified all of these things you know how many properties you need to acquire and how much you need to generate per month in positive passive cash flow in order to one day say you have retired financially free.
Assess Your Financial Position
The next thing you need to do is assess your current financial picture.
You need to consider how good your credit history is for being able to qualify for traditional loans.
You should consider how much cash you have available to place a down payments and make renovations. Your cash and assets will also help you secure lines of credit, credit cards and other leveraged debt that you can use to invest.
Analyze Your Experience Level
You also need to analyze your level of experience. You should consider your strengths, weaknesses interests, personality, lifestyle and more when considering how to start investing in real estate in 2019.
You may be really good at interior design, for instance. If you do then you should look for ways to maximize this gift as you rehab properties. You may have a background in residential construction, which is a perfect skill set to have for property renovations. If this skill set, then you can look for properties that are in worse condition that can be rehab and brought back to full market value, or ARM.
For others, you may have more of a financial background, so you may be better with looking at and working the numbers to ensure you’re making a great profit margin on each of the deals you do.
Take a Gut Check – Comfort Level
Another thing you need to assess is the level of comfort you have with making real estate purchases. You may not have the emotional wherewithal to do a full rehab projects if you don’t have any experience with this yet.
So, you may look for properties that only need minor improvements, such as paint, carpet, and new fixtures throughout.
If you don’t have the comfort level to do a full rehab and you get yourself into that kind of a project, then you can cause yourself a lot of emotional, and potentially financial, harm.
Choose a Strategy That Works for You
There are many different types of properties you can narrow your focus on to start investing in real estate in 2019. Here we are going to take a look at some of the popular path to real estate investing.
- Vacant Land – This strategy is certainly not for everybody. You need to have a lot of money in order to feel comfortable buying raw land that is undeveloped. The problem with raw land is that you don’t know if the market is going to move in the direction soon enough to where people want to lease car purchase that land from you for developments.
- Single Family Homes – This is the bread and butter of real estate investors. Purchasing individual houses is a great way to get started as a real estate investor. You may just set a goal to purchase one new home per year to slowly build your portfolio.
- Small Multifamily Properties – Small multifamily properties may include duplexes, 4-unit homes, and maybe up to 9-unit apartment buildings. If you can start at this level of real estate investing and that’s great because you get a lot more bang for your buck and these are a lot more profitable than purchasing single-family homes. You can have nine different renters paying you as you paid down one mortgage, have one rule fixed, pay for the long care of one property than get discounted pricing on raw materials such as carpet, paint, drywall, fixtures and more for all of your units. You should certainly look at acquiring multi-unit properties to build your retirement portfolio.
- Large Multifamily Properties – As you gain more experience through managing a small multi-unit property, you may then decide to go bigger and purchase a large multifamily property. This may include 20-unit apartment buildings and more. These are going to be far more profitable and single unit family homes, however, you will need to consider the fact scaling up this large it’s turning your real estate investing into a real business. Once you get to 20 units and more you need to consider having some assistant staff person available to deal with tenants and much hire it out to a property management company.
- Commercial Real Estate – Commercial real estate is a bit of a different beast than residential real estate. They can be far more profitable, but on the other side of the pendulum, you can lose your shirt faster too. You need to do great research and teach yourself the ins and outs of this form of real estate investing before you go into it.
- Mobile Homes – I know a real estate investor who swears by mobile home investing. Mobile homes drop in value very fast and they more quickly deteriorate in quality because they are a much cheaper build. You can make good income doing it but you should, again, do some research on how to win mobile home investing first decide whether or not this is the path for you.
- Notes/Paper/Mortgages – There are some real estate investors to take over the mortgages from other investors or property owners. Issue resource ins and outs of this type of investment to see if it is something you would like to get into.
As you begin to type into the work of starting to invest in real estate in 2019, you will need to take several other steps towards your goal. In the next article we will carry on with other things you should consider for launching your real estate investment business.