Without access to a large amount of capital, real estate investing can seem impossible. A typical home in the United States sold for $277,148 in May 2021
. That’s a 13.2% increase from the previous year. As prices keep increasing, you might feel that you missed your opportunity to invest.
Don’t cancel your investment plans just yet. We have a few money-saving tips that can help you get into the real estate market.
Work With a Local Agent for an Insider’s Perspective
Success in real estate comes from getting back more money than you spend. You want a high return on investment (ROI) that compensates you for your time and the risk you took.
Working with local agents
gives you an insider’s perspective into your area’s real estate market. Perhaps it makes more sense for you to buy property in one neighborhood than another right now. Maybe you should concentrate on multi-family properties instead of single-family houses.
When you form a relationship with a local real estate agent, you can get recommendations that lead to long-term success.
Find a Reliable Mortgage Broker and Keep Using Them
Few people have enough cash on hand to purchase real estate without borrowing money. Ideally, you have at least 20% of the property’s value, so you can make a down payment that helps you avoid private mortgage insurance (PMI).
Since you probably have to borrow money, look for a reliable mortgage broker that wants to form working relationships with real estate investors.
A broker who knows you want to purchase multiple properties might find ways to give you lower interest rates. Even 1% can save you a lot of money over time.
A broker might charge you 4.5% when you borrow $250,000 to buy one property. When you buy two or more properties, though, they might lower your interest rate to 3.5%.
At 4.5%, you spend about $206,000 on interest over 30 years (about $94,250 if you can repay the full amount within 15 years). At 3.5%, your interest payments fall to about $154,140 over 30 years (around $71,700 over 25 years).
By getting a lower rate, you can expect to save anywhere from $52,000 to $23,000.
Identify Skills You Have for Improving Properties
You can save a lot of money by investing in real estate that needs repairs and upgrades. If you have experience in wiring, plumbing, or construction, you could save money by doing much of the work yourself instead of hiring contractors.
Make a list of the skills you have for improving properties. Send a copy of the list to your real estate agent so they can prioritize opportunities that fall within your skillset.
Find Partners Who Bring Other Skill Sets to Your Real Estate Investment Team
Skills in one area will help you save money, but you will still need to hire contractors to update real estate significantly. Or you can avoid contractors completely by finding partners who can contribute money and work to real estate investing opportunities.
Talk to people you trust to create a team with diverse skills. Even home decoration can play a crucial role in selling properties at higher prices.
Keep in mind that growing your team will shrink your percentage of the profits. At the same time, you lower your expenses and risk by spreading it among more people.
Earn Profits Quickly With Short-Term Investments That Will Fund Long-Term Investments
You might not have enough money to purchase a large property right now. That doesn’t mean you can’t find the funds to buy a small, inexpensive house or condo. Get a property you can afford, improve it, and have your real estate agent sell it for a higher price.
Devote the profits from your small project to a slightly larger investment. Eventually, you might have enough investment money to purchase several houses that you rent out. Over time, you will accumulate more money until your short-term investments lead to opportunities that provide ongoing streams of passive income.