Getting started as a real estate investor might be the first step you take on the path to wealth. You don't need as much as you might think to invest, and with demand for rental properties in Chicago on the rise, there's no better time to get started.
Read on to learn more about how to make money investing in real estate.
Why Become a Real Estate Investor?
There are several reasons why people invest in real estate. The most popular reasons are to reduce tax burdens, profit off of potential price appreciation, and generate rental income.
The beauty of investing in real estate is that you can accomplish all three goals (increase income, provide tax relief, profit off of appreciation) at the same time.
How Do You Invest in Real Estate?
There's more than one way to invest in real estate. Some popular choices include rental properties, house flipping, and REITs.
If your goal is to become a landlord, then look into investing in rental properties. Your responsibilities include paying the mortgage, homeowners insurance, and property taxes. You'll also be responsible for finding tenants, maintaining the property, and dealing with any issues that may arise.
If the idea of passive income as a landlord sounds good, but dealing with tenants and managing the property don't - you're in luck. Many real estate investors choose to go with a property management company to oversee their investments. Property management companies can screen tenants, collect rents, deal with maintenance, and much more.
Unlike rental properties, house flipping involves buying and reselling the home for a profit. Generally, there are two ways investors do this: repair and update and hold & resell.
Repair and Update
This approach involves buying a property, making certain upgrades and repairs, then selling the updated property at a profit.
Hold & Resell
Buy a property in a market that's rising rapidly in value, hold it, and resell it later at a profit. This approach works a lot like the "buy low, sell high" principle that many stock market investors use.
REITs, or, Real Estate Investment Trusts, involve a corporation (or trust) being formed to use investors' money to buy, sell, and operate properties that produce income. REITs are bought and sold on major exchanges like NASDAQ and the NYSE.
Some Tips for Investing in Real Estate
Before you decide to take the plunge and invest, here are a few real estate investing tips to consider. Whenever you invest, you want to do so from the best possible position.
Pay off your high-interest personal debt before you invest. You want extra cash to be available when you need it.
Save for a Down Payment
The usual down payment for an investment property loan is about 25% of the purchase price. If you don't have that much on hand, either save up or try to raise it.
Location, Location, Location
Location is absolutely critical in real estate investing. Find an area with a growing population and job market. The demand for property in the area will probably be much stronger there than in other places.
Need More Help?
There's never been a better time to become a real estate investor in Chicago. You have multiple investment routes to choose from, a growing market, and property management companies that can help you maintain your investment.
If you'd like to learn more about real estate investing, check out our blog.