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Investing in real estate can be a strong path to financial security. Often, we see people opt to put their money in the stock market, but we have seen many more people achieve financial security through investment in real estate and the acquisition of homes to not give you that avenue. I have seven rules for investing in real estate, which I’m going to share with you. Before you get started, however, there are some prerequisites.
No matter what anyone tells you, in order to qualify for a mortgage you must have a stable income and low debt, as well as a good payment history. Once you have that, here are the seven steps you should take:
- Buy your first home with a low down payment. Don’t put as much money down as you can on your first home. You can get an FHA mortgage for 3.5% down or a conventional mortgage for 5% down.
- Under-buy. For investing in real estate, you should buy your first home for less than you qualify for because you’re really buying that first home to rent it out. All you really need is a three-bedroom, two-bathroom home at a convenient location that is structurally sound and one you could hang onto for 10 years.
- Live in that home for a year and save your money.
- Establish a two-year rental history. After that, you can use approximately 75% of that rental income to qualify for your next home.
- Build cash reserves for vacancies, repairs, and warranties.
- Repeat the process as often as your income and strategy will allow.
- Somewhere between five and 10 years, you’re going to accrue rent above what your payments are. Use the excess amount to snowball and pay off your rental homes.
Before you get started with this process, I do have a couple of cautions for you. First, it involves debt. You need to respect that debt and be wary of it. This method also involves delayed gratification, which is a tough concept for most Americans to grasp.
Finally, you need an agent who loves and understands real estate. Someone who can be with you through the process and guide you through it. Our team has been selling real estate in the Triangle for a long time, and we can help you perfect this strategy.
Buying in this market can be competitive, but it’s easier when you have access to a site like ComingVerySoon.com. It gives buyers a sneak preview of homes that aren’t on the market yet, but will be soon. It gives interested buyers a chance to see the home and decide if it’s something that might interest them.
If you have any questions for us at all, give us a call or send us an email. We would love to hear from you.