Making your first real estate investment can be scary. Where should you buy? How much should you invest? What will you do with your property once you own it? Our first time investor tips will help you avoid dangerous rookie mistakes that could become pitfalls in your investing career.
I’ll start by pointing out that you’re making a great choice! Denver real estate is booming and is projected to continue its equity upslope. By thoughtfully investing in the Denver real estate market, you’re likely to build your wealth and get hooked on the exciting world of real estate investment.
1.Select the right type of real estate investment for your situation
Within the world of real estate investment, there are several branches to consider: rental properties, fix and flips, scrapes, new builds, and assignments. Each type of investment offers a variety of benefits as well as some pitfalls. Use our convenient Investment Requirement Charts to consider your credit, available investment capital, and available time to select the type of real estate investment that fits your current situation best.
2.Research locations that are most likely to make you money
It’s common knowledge that a real estate investor shouldn’t buy a property at a premium price. Your goal will be to buy low and sell high! There are several ways to accomplish this. First, you can identify an up and coming neighborhood – a place where property values haven’t quite met those surrounding it but that shows promise for growth and popularity. Perhaps this neighborhood is expecting a new light rail stop or trendy shopping center, and is therefore a promising site for housing desirability. In general, if you consider the city as a radiating hub, you can expect home prices to rise from the center outward (especially when taking into account the continued population growth projected for Denver).
Another money-making tactic would be to identify an affordable property (may be in need of some TLC) within an already popular community. To read more about finding the perfect Denver neighborhood for your first real estate investment, visit our recent blog discussing neighborhood-specific market trends.
3.Plan for accurate rent or resale values
One of the biggest mistakes first time investors make is budgeting around incorrect cash flow projections. Check and double check your estimates for rent or resale before ever making an investment purchase. Use this handy cashflow calculator to estimate your potential profit and loss. And – without a doubt – don’t purchase an investment property if you can’t realistically expect positive cash flow.
4.Budget for repairs
Whether you’re purchasing a rental property or a fix and flip, you’ll likely need to sink some of your finances into home repairs. Don’t fail to budget for these costs, or your projected profits could be swallowed up by unforeseen costs!
5.Most Important of Our First Time Investor Tips: Don’t give up too soon
Don’t forget that investing your personal, hard-earned money will be stressful. You’ll likely doubt your decision. But, remember that this process will be the first step toward long-term gain and (perhaps) a new money-making hobby! The emotional phases of investing are common, so don’t give up if you start to feel discouraged.