Here are the 3 steps you need to warm up and get going in Christiana real estate investment:
Can you afford to buy property without taking out a mortgage? If not, can you afford to make a 20% down payment on property?
Being able to afford property without taking out a mortgage is a phenomenal way to launch yourself into Christiana real estate investment. You will begin making high, immediate profits from your rental income and won’t accrue years of interest. And you need not be rolling in cash to buy property without a mortgage. Try checking our foreclosure properties. You might be surprised what you can purchase without running to the bank!
If you do need a mortgage, all is not lost. Just do your best to scrape up a 20% down payment. If you fail to make a 20% down payment, you will be stuck with private mortgage insurance, which can add an extra $100/month to your mortgage payment. That is a big bite out of your profit, and rental income will have to be high to compensate!
As a property owner, you need your property to generate positive cash flow (rental income – monthly expenses = a number greater than zero). If you’re not generating positive cash flow, you are losing money.
Use the rental rate of comparable properties to estimate the rental income you will be able to make. Make sure you choose “comparable” properties that have a similar size and age to your property and are located nearby. Also look for properties that have been renting for a long time, so you know their income isn’t a fluke! You can get a nice, round idea of your rental income if you are able to average the rental rates of several comparable properties.
Get pre-approved for a mortgage by a lender to get a baseline for your monthly expenses. Don’t forget to add money for taxes, homeowner’s insurance, and incidental repairs to this baseline.
There are more possibilities out there than you, as an amateur Christiana investor, might realize!
Look beyond the amateur default (single, direct home ownership) at options like partnerships (both closed and limited) and publicly traded investment trusts. These options take the onus of property management off your shoulders, which is especially helpful if you lack the time or skills to run a property.
Once you’ve followed these three pieces of advice, congratulate yourself! You’ve graduated from baby steps, and you are now ready to throw yourself into the marathon that is Christiana real estate investment. Work hard, stay sharp, and your pocket will be so full of cash that it drags the ground by the time you cross the finish line.