Jumping into real estate investing is a way to improve net worth expeditiously. But before you dive in, take the time to arm yourself with information and resources. Real estate is worth hundreds of thousands of dollars. While an investment can yield a high return it can also result in huge losses when investors are not prepared. Treat investing as a business. Here are five tips for new investors of Michigan real estate.
Understand the Market
Narrow a market to begin with in Michigan. Look for an area that is rising in prices and projects future growth. Learn everything you can about that market. Talk to realtors, other investors, and homeowners. Walk the community and speak with business owners.
Understanding the market means you fully understand the real estate trends in the area to include pricing and inventory trends. Learn about the type of people who live in the area and determine whether to buy and sell quick or buy and hold. Find out about cumbersome city codes of construction that might affect rehabbing a property and learn all the rules regarding landlord/tenant rights.
Buying a property without being an expert in the local market puts your investment at risk. Take the time to do your due diligence.
Mind Your Credit Score
New investors rarely have 100 percent cash to buy and sell properties. As such, you’ll need to learn to leverage debt. The better your credit is, the better pricing you receive on financing. Better pricing improves your margin for profit.
Check your credit score. Look at what might be keeping the score down. Take measures to improve the score by contesting mistakes, paying off anything that is late or delinquent and look to reduce your overall credit card debt. Bank lenders seek FICO scores of 720 or higher. If you don’t meet these standards, you’ll need to find private equity lenders or take on a partner who has the ability to finance properties.
Target a Niche
Don’t try to master all real estate niches. Eventually, you may want a diverse portfolio of real estate investments but take the time to seek out one niche to learn about and become an expert in. Many new investors begin with either a fix and flip niche or a rental property niche. There are different things to master in each of these categories.
As you go through several deals, you will foresee problems and learn to maximize returns by minimizing mistakes. If you try to do too many things at the onset, you might become overwhelmed with a lot of information and emotion happening on a grand scale. Master one niche and then expand into others.
Establish Financing Relationships
Understanding your credit score alone won’t get you the loan. Network with financing companies and lenders. Learn the requirements for real estate investment loans. Many financiers view these loans more as a business loan rather than a real estate loan especially if the property needs work. Properties that need work need financing beyond the purchase price.
Do your due diligence on financing ahead of time. If you have studied the market and know your niche, you will want to move quickly to capitalize on opportunities as they arise. Start outlining a business plan that reviews the market, your experience and ability to turn a property into a profit. If you are able to get financing commitments and approvals early in the purchase process, you become a strong buyer that sellers want to work with.
Join a Real Estate Investment Club
When you are new, you can benefit from learning from those with a lot more experience. Real estate investment clubs in Michigan are filled with investors from different niches and a wide range of experience. Join a club and talk to those who have made mistakes and learned from them. Use their experience to prevent your own newbie mistakes.
Also, network to find deals and even partners for properties or financing. Club members are always looking for a new deal. Take the time to learn and participate. Seek out a mentor who is willing to guide you through the process of your real estate investments.