Investing in real estate has the potential to earn you a second source of income, that’s also passive. Passive income means that you’re earning money on a consistent basis without having to work for it. However, just like any other investment, investing in real estate can be particularly risky, so it’s not something to jump right into if you know nothing about the real estate industry. Here are three tips on how to become a successful real estate investor.
1. Familiarize Yourself with the Different Types of Real Estate
When it comes to investing in real estate, there are different types of properties to choose from, and you can even invest in real estate without purchasing a property or land at all. The latter involves REITs, or real estate investment trusts. These are similar to mutual funds, in which you invest into a company or other organization that has invested in a commercial property. Many first-time real estate investors choose to invest in REITs before actual properties to get an idea of what it’s like to invest in property. Although REITs don’t generate as much money as an actual property, they’re still a good investment.
Many first-time real estate investors also choose to invest in residential real estate (i.e., single-family homes, vacation rental properties, multi-family homes). This is a good way to earn a steady stream of income by collecting rent each month from your tenants. You can also collect rent from your tenants in a commercial property (i.e., office buildings, shopping centers, etc.). No matter what type of property you choose to invest in, make sure that it’s located in an area that’s seeing real estate growth, as well as economic growth.
2. Make Sure that Your Properties are Being Managed Properly
If you decide to go the property route, you’re automatically considered to be the property manager or landlord. This means that all of the responsibilities of managing and maintaining the property fall on your shoulders. Poorly managed properties do not attract tenants (at least not consistently), and this can harm your monthly cash flow. It takes a lot of hard work to manage a property, and property management becomes even harder if you own multiple properties or if your property is located far from your primary residence. If you feel that you can’t handle the responsibilities of managing a property, then the best thing to do is to hire a property management company to help you.
Keep in mind that the company you hire to manage your property is a reflection of you as a property owner. Look for trustworthy companies that fully understand the ins and outs of managing a property, whether it’s residential, commercial, mixed-use, or industrial. You may also need to hire a cleaning company if the property management company you hire doesn’t provide cleaning services. It’s important to keep both the inside and outside of your property neat and tidy.
3. Consult a Professional
You can get even more helpful tips about investing in real estate by talking to a variety of professionals. First, talk to a financial advisor. Kansas City financial advisors are available to help residents of both Kansas state and Missouri with their real estate investment needs. You can also talk to seasoned investment professionals who have invested in different types of real estate to learn what types of properties are the best to invest in around your area, and what to expect once you’ve purchased a property. It helps to have professionals willing to give you advice so you can be successful with your investment.
Remember that with any type of investment, you must be patient and understand that it takes time to become successful. With both patience and perseverance, you’ll start to see a return on your investment and a steady stream of passive income.