While the rewards can be great, investing in real estate also involves significant risks, and mistakes can be extremely costly. It is a good idea to seek the advice of professionals in the field, such as real estate agents or best hard money lenders, before you make any buying decisions, but if you are interested in getting started with real estate investment, here are a few ideas to help you get off on the right foot.
1. Understand Various Money-Making Opportunities Involved
You may think that, as the owner of an investment property, you will make money by collecting rent from tenants who lease your property. This is called cash flow income, and it is actually one of four different ways that you can earn money from real estate investment. The other two sources that may apply to your situation when you’re first starting out are ancillary real estate investment income (i.e., profit from vending machines or laundry facilities) and real estate appreciation.
2. Consider a Bridge Loan
Many first-time investors have difficulty obtaining a bank loan for an investment property. A bridge loan from a hard money lender doesn’t go through a bank and uses the value of your existing property rather than your creditworthiness as the main criterion for approval. Bridges loans have a number of advantages:
- Relative ease of approval
The lattermost can vary, however, depending on your intentions for the property. Federal regulations mandate that bridge loans for residential real estate take 2-3 weeks to fund a loan for an owner-occupied property, but a loan for an investment property can be funded within a matter of days.
3. Don’t Make the Purchase in Your Own Name
Otherwise, your personal assets could be at risk in case of a default or lawsuit. Even if you intend to invest as an individual, create a limited liability company or similar entity to make the purchase.
If you take a smart approach to real estate investment, the rewards can be great. When you’re ready, contactLos Angeles hard money lenders to help you fund your first purchase.