Whether it’s part of your retirement plan or a way to pay off student loans (like me!), investing in real estate can be a lucrative endeaveor. If it wasn’t for real estate investing, I would not be debt free! While I have mostly stuck to house flipping, there several ways to invest in real estate. I’m sharing how to start a real estate investing career!
How To Start A Real Estate Investing Career
Step 1: What Type Of Real Estate Investing Do You Want To Do?
- Rental Property- a typically vacant property with 1 or more doors that is occupied by paying long-term tenants. (example: duplex). Looking for a great resource on rentals? Check out Rentals To Wealth.
- AIRBNB- A furnished room or property that is rented out on a short-term basis, typically to travelers. While I briefly dabbled in Airbnb (you can read about here), there true experts in Airbnb investing are Nick & Sarah from Nestrs.
- House Hacking- An owner-occupied property that is either being renovated to appreciate in value or offers rooms or buildings that can be rented out on a short-term or long-term basis. This has been my wheelhouse for years!
- House Flipping- A fixer upper vacant home which is renovated and sold at an increased price. Looking to meet other investors? Check out my Meet The Investor posts on Instagram.
Step 2: How Will You Fund Your Investment Property?
Once you’ve figured out what type of real estate investing you want to do, the next important thing to figure out is how you will fund your investment property.
- Conventional loan- Eligible for most properties. Typically, must be able to show 2 years’ worth of employment history & good credit score. Requires more out-of-pocket, anywhere from 10-20%.
- FHA/RD/VA- Only eligible for owner-occupied homes (house hacking, live-in flips, owner occupied AIRBNB). Must have minimum credit score (usually 620) & employment history. Little to no down payment. Strict property condition requirements are in place. Owner occupied offers tax incentives as well.
- HELOC- A loan against another property you currently own which borrows on the equity in that property. Each lender is different but closing costs are minimal in comparison. There could be an expiration date for you to access funds at the locked-in interest rate.
- Cash- The term cash is subjective and can refer to stocks, retirement, or actual cash. The risks involved are funding any repairs, losing tax benefits, and potential loss of gains if the money had been in stocks/investments.
- 1031 Exchange- Transferring the proceeds from one investment property to another property to avoid paying capital gains in the immediate. Strict guidelines are in place for 1031 exchanges, and it does not alleviate capital gains—but delays it. It’s important to note that the IRS doesn’t recognize house flips as investment properties.
- Hard Money/Private Money- Working with a partner that either partially or entirely funds the renovation. This is only ideal in vacant house flips, rather than owner occupied. A partnership agreement should be in place delegating responsibility & proceed distribution. Typically come at much higher interest rates or higher “investor cuts.”
Step 3: How To Find Investment Properties?
Once you’ve found a way to finance your property, it’s time for the fun part– shopping for a property to invest in! There are several ways to find properties– and I’ve utilized a lot of them!
- We Buy Houses Campaign- Creating a professional looking letter in Canva, direct mail campaigns target 2nd homes, homes with delinquent mortgages or taxes, recent deaths, divorces, and homes in visible disrepair. Tip: Hand write the person’s name on the envelope rather than using printed address stickers.
- Networking- Across the country there are numerous REI meet-up groups. Network with other investors. Many investors have particular niches (like me) and may come across a property they don’t personally want but could forward to you.
- Social Media- Create social media pages, landing pages, and advertise within your niche & geographic area.
- MLS- Homes listed by real estate agents. These homes are also available to non-investors and typically have far more competition.
- Auctions- Many attorney offices handle the sale of foreclosures. Also, many states have “Land Commissioner auction” for back taxes/liens. These types of auctions are sold sight unseen, no inspection, no appraisal, no access, and for cash only (cashier’s check present at auction).
- Government & Bank Foreclosures: HUD, VA, and other government entities sell homes that were foreclosed. You may also find these properties listed on the MLS in some cases. You can search most government foreclosures at www.hud.gov. Many banks will list their foreclosed properties on the MLS, but many also have websites featuring their foreclosed properties.
I recently spoke with a few other talented ladies at Haven Conference about How To Start A Side Hustle. Real estate investing makes a terrific side hustle! But if you’re curious about more side hustles & tips from the pros visit these wonderful women: