So it has come down to the fact that you want to invest in a rental property. One problem: you lack sufficient funds, and real estate investment is rather expensive. It is not uncommon that in today’s consumer economy, it is very difficult to save. Between chasing after the latest iPhone, travelling, buying groceries, and paying rent, you have little or no money at the end of the month. So how do you even begin to consider investment in rental property?
You lack funds because one of two reasons; you are either spending too much, or not making enough in the first place. At the same time, you may think you are not making enough money, but in reality, you are just spending too much. To help you out, we have put together a list of 8 tips to help you save money to make money in real estate. It’s much easier than you think.
Tip #1 To Make Money in Real Estate: Do Your Research
Before you do anything, research. When you think you have done that, research some more. Research may not provide you with direct flow of cash, but in the long run, it will help you decide what investments are worthwhile. Research helps you decide whether or not all the numbers add up. It will help you figure out whether or not you are financially able and ready for an investment. Try to predict how much money you can make off of your first investment and weigh that in with the costs. Do the numbers make sense?
Mashvisor helps you conduct your research. Mashvisor offers comprehensive data analytics for numerous cities in different states nationwide. All you need to do is type in the name of the city you have in mind and the platform will take care of the rest. The information focuses on top traditional and Airbnb properties, occupancy rates, Cash on Cash return, rental income, and more.
Tip #2 To Make Money in Real Estate: Set An Attainable Goal
One of the most important things to do after planning is setting realistic goals. What do you hope to achieve from this investment? What type of property can and will you invest in? When do you expect to break even? What is your expected rental income? What is your expected rental yield? All of these are questions you should begin asking yourself to better help you finance an investment.
Once again, make sure your goals are aligned with the research you have conducted to better envision and sustain your plans.
Tip #3 To Make Money in Real Estate: Realize Your Expenses
As we have mentioned above, most of the times, the reason you are not able to save money is simply because you are spending too much. See how much of your income you are spending in general and then break your expenses down. Which expenses are essential, and which ones are not? Which ones are personal and which ones relate to your investment?
You probably have an idea on which expenses are essential and which ones are dispensable, but you need to learn to break the two apart. Essential expenses may include food, rent/mortgage payments, transportation, among many others.
If you are purchasing a property, remember to mind expenses like holding costs, closing costs, repairs, down payments, etc.
Tip #4 To Make Money in Real Estate: Cut Back On Expenses
Once you have broken down your expenses, you are ready to cut back on the dispensable ones. These may include cell phone, shopping, and going out. Entertainment expenses may also drain your budget. These include cable TV, travelling, membership at your local country club, among others. You may think these expenses are minor, but when you are trying to make money in real estate, things as simple as your morning to-go coffee can make a difference in the long run.
If you are aiming for more serious cut backs, try to cut down on things like energy bills and transportation.
Tip #5 To Make Money in Real Estate: Decide On A Savings Rate
Apart from cutting down on expenses, you also need to save actual money. How much of your monthly income do you think you can save? We suggest you start off with a small percentage, as low as 10% or 15% and later increase that as you go along.
Also, remember to save this percentage before you pay any bills to make sure you are actually saving.
Tip #6 To Make Money in Real Estate: Become An Owner Occupant
If you have the financial capability to do so, definitely consider becoming an owner occupant. Buy a house, move into it for a year, and satisfy its loan requirements. After the year has passed, purchase a new house, move out, and rent your old house. A year after that, repeat the process. This will help you cash money quickly.
The downside to being an owner occupant however, is the constant hassle of moving in and out of homes, especially if you have a family. Additionally, you may need to take out big loans, and have to pay high mortgage payments when you are constantly purchasing property.
Tip #7 To Make Money in Real Estate: Learn How To Budget
Learning how to budget will definitely help you save to make money in real estate. Consider your savings as expenses in your budget. This way, when it is time to spend money, the saved portion is not available for spending.
Additionally, keeping a budget will help you control your spending. Keeping track of all of your spending will help you figure out which ones are important and which ones can be forgone. More importantly, keeping budget will help you figure out where you are financially to help you better plan and set attainable goals.
Tip #8 To Make Money in Real Estate: Ask The Seller For Help
This may be a long shot, but sometimes asking the property seller for help works. You could ask them to pay the closing costs for a property, or for you to put down a lower down payment. They may not always be willing to help, which is expected, but it doesn’t hurt to ask. You never know!