Investing in real estate is a popular strategy among many Americans who are trying to make more money and grow their wealth. Do you know why? Because property is very valuable and is considered to be a great long-term investment – the one thing that holds people back is that investing in and owning real estate is a big commitment that requires a lot of time and money. The great American dream tells us that a big part of it falls in homeownership, which means that most people will save up money to have enough for a down payment on their first home. Then they’re likely to sell that first home and take the profit they made and invest it back into a larger home.
If you are looking to buy your first home, but you don’t necessarily love the homes or the neighborhoods that you can currently afford, then you should consider buying an investment property in Bryan, TX instead. Here are some reasons why many first time buyers are investing in real estate instead of taking the traditional route of buying their first home.
- Home values are at an all-time high and are consistently increasing year over year. While we don’t know how the COVID pandemic will impact the real estate market and home values long-term, at this point in time the market is still strong in Bryan College Station.
- Interest rates are historically low, which means that your monthly payments will also be fairly low. The interest rate that you qualify for largely depends on your credit score, the down payment amount and your debt to income ratio. Most first time buyers will put down between three and five percent, but it is best to put down 20% so you can avoid mortgage insurance, qualify for a lower interest rate and enjoy lower monthly payments. When it comes to credit score, banks want strong borrowers with a score above 740. If you are having a hard time qualifying for a low interest rate due to a small down payment, lower credit score or other issues then you should consider working with a smaller bank that may have more flexibility in lending than a big national bank.
- One of the main reasons why buyers wait to pull the trigger on buying a home is that the home they want or the neighborhood they are interested in is not affordable. With home values on the rise many first-time buyers find it impossible to purchase a home they like in an area they like so they end up settling for a smaller home or a less than desirable area. If you find yourself in this scenario you should consider buying an investment property in Bryan that you can rent out. This allows you to get your foot in the real estate door, generate monthly cash flow and build equity until you can afford to buy the home of your dreams in the neighborhood that you like.
- Owning real estate that you operate as a rental offers many tax benefits and write offs that can help you save money long term.
- When you operate a home as a rental property you can charge rent that is higher than your mortgage, which helps you cover your monthly expenses as well as getting extra cash flow that you can set aside for the down payment on your dream home.
- Another reason why buyers choose to invest in property is because they want or need flexibility in their lifestyle. Owning a home can limit your ability to relocate if you need to, which might not be a good fit for your current lifestyle. Buying an investment property in Bryan, TX gives you the freedom to move if you want to, but you won’t miss out on growing your real estate portfolio and equity.
Investing in Property
Investing in real estate can mean many different things – you can own a single-family property, a condo or townhome or you can invest in apartments, retail and land. The best decision is dependent upon your unique situation and what your investment goals are. Let’s take a look at the most common ways that people invest in real estate:
- Buying a single-family property is the most common type of real estate investment. It is a wonderful way to create additional revenue on a monthly basis, and it could also earn you a nice profit if and when you choose to sell. The key to being successful in this type of investment is to buy in a good location that has potential for growth. For example, buying a home or a condo near Texas A&M University is a great opportunity because there is always a need for student and faculty housing in the area.
- Another common real estate investment is flipping homes. What does this mean? This is when you buy a home that is usually a fixer upper, put some money into it for renovations and improvements and then sell it quickly for a profit. Flipping homes is an appealing investment because the profit turnaround is quicker than renting out a property for years. The risk with this investment is that you could lose money if the market changes before you are able to sell for a profit. They key to being successful with flipping homes is to buy low, make only necessary improvements and don’t overspend on the renovation and to sell quick.
- There are other opportunities to invest in real estate, including commercial properties like apartments, retail shops and more, but those can be more difficult and come with a higher price tag.
How to Invest in Real Estate
You might be wondering when the best time to invest in real estate might be, and the answer is whenever you are financially ready. Keep in mind that investing in real estate is the same as buying a home – except that when you invest the goal is to make money back on this property so you can begin to build wealth. If you can own multiple rental properties that you have cash flow from, as well as your own family home then you are all set. Here’s a quick guide to help you get started when buying investment property in Bryan, TX.
- Save up for a down payment of at least 20% so you can avoid mortgage insurance, qualify for a low interest rate and keep your monthly payments low. The lower your monthly payments are the more cash you’ll be able to make from rent. Take your time shopping around with your lender for the best rate.
- If a real estate portfolio is part of your long-term plan for growing wealth, then you should diversify your investments. This means that if your whole net worth is invested in real estate any ups and downs in the market will throw you into a panic. Keep your money spread out in other investments like a 401(k), Roth IRA or other savings accounts. You can also diversify your money by investing in different types of real estate – like apartments, retail shops, etc.
- While it is possible to own investment property all over the country successfully, if you are just getting started then we recommend you stay local. Even though you will most likely hire a property management company to take care of your property, to assess damage and make repairs, at the end of the day you are the only owner and it’s important to keep tabs on your investments.
- Be prepared for risks and to lose some money. Renting out a property sometimes means that the home will stay vacant for a few months until you find new tenants. During this time, you are responsible for making the mortgage and utility payments, which can be tough to do if you are not prepared. Even when you have tenants in your investment property you will still need to be ready to make repairs and to take care of it if something breaks.
- Hire a real estate agent before you make any decisions. A professional realtor will help you understand the local market, they’ll know what areas you should look into and what hurdles you may face as an investor. They will also help you through the purchase process once you find the perfect investment property, and they can also help you find tenants once you are ready to operate it as a rental.
There are many pros and cons to investing in property and real estate – it isn’t for everyone! If you are debating on whether or not buying an investment property is right for you, we encourage you to discuss this opportunity with your financial planner and a real estate expert. Our team has more than 25 years of experience in the real estate market and we’ll be happy to answer your questions about investing in property and help you find the perfect homes to start with. If you would like to learn more about us or to explore our current listings, please contact us. We look forward to hearing from you soon!