Growing Your Wealth with Real Estate

I believe that owning your own home should really be your first investment in real estate

I am in real estate as you might guess since I have the designation REALTOR® behind my name and yet, other than buying the house that I lived in it took me years to start investing in real estate. I can clearly remember the first house I bought as an investment. It was all I could afford and it needed a great number of repairs that cost more than I could pay at the time. So, once I made the purchase, then I took on the repairs as I could afford to do them. It took me 3 months to finish the house and get it rented. I was so happy to be done with the project and to now be a landlord, growing my wealth! What a great adventure!

Pretty soon, I was buying my second property. This one also took about 3 months to fix up and get rented.  I had learned a great deal with my first investment, so this property was making me even more money!

I believe that owning your own home should really be your first investment in real estate. However, if you don’t own a home yet and want to get into investment properties, you could look at buying a duplex or a fourplex to live in. If you choose to go this way, you not only have your first home but your first rental property. All types of loans (conventional, FHA, and VA) will allow the home buyer to buy a duplex or a fourplex at the normal rate and downpayment. This is great because it is an easy way to break into the rental market and you are living on the property so you can monitor your tenants' activity and deal with “fixes” quickly.

Also, you could get a better loan because you are living in a unit on the property and it is considered your home. A regular home loan can be obtained with as little as 5% down and VA can go as low as 0% down. If you buy a property as an investment where you are not living in it, the rate is usually 20 to 25% down with an interest rate that is slightly higher. As you can see, buying multiple units can save you a bundle and you get the advantage of a place to live and making money too!

When you are buying a rental that you are not going to live in, there are some other things that you should consider. Your lender wants to see that you have owned or managed rentals before. They also like to see a lease in place, so you might want to look closely at properties that already have tenants. With a lease or tenant, the income from the property will be considered as part of your income, so you will qualify for a higher loan amount. The lender will deduct at least 25% of rental income to cover expenses and vacancies, so 75% of the rental income usually can be added to your income.

I would not consider buying a house to rent unless the rent covered the mortgage, taxes, and insurance with at least 5% over your costs. You have to keep in mind that you will have to pay the mortgage, taxes, and insurance whether the property is rented or not. 

After becoming a real estate investor, I highly recommend it. This is a good way to grow your wealth. If you want to start investing there are REALTORs® and lenders that are experienced investors and are happy to help you. There are a lot of different types of investments that you can take advantage of and meet your goals.