Fact: a lot of people have achieved financial independence through real estate investing. Further, real estate investing has the potential for higher returns than other kinds of investing, say, in stocks. Since 1970, the average annual return on real estate has been 11.42%, but for the S&P500, it has been 10.31%.
But if you’re new to real estate investing, it may seem completely out of your reach. By starting small and striving for consistent forward progress, you can do it. Here, then, are some easy ways to get started in real estate investing in Phoenix.
Be Clear About Your Goals
The first step to get started in real estate investing in Phoenix is to get clear about your goals. You simply can’t have some vague, fuzzy goal like “make enough money to quit my job.” It has to be much more specific.
A good way to get started is by using the S.M.A.R.T. method. This acronym stands for specific, measurable, attainable, relevant, and time-bound – all good criteria for sound investing goals. Here, for example, is a good S.M.A.R.T. goal: “I want to net $100,000 over the next 12 months by buying, rehabbing, and flipping four houses at a profit of $25,000 each.” It’s a specific goal, you can measure progress, it’s attainable, it’s certainly relevant, and it’s definitely time-bound.
Know How You’ll Get Financing
The next hurdle to clear to get started in real estate investing in Phoenix is to figure out how you’ll get financing. It’s better and less stressful to get financing squared away first, rather than finding a good real estate deal and then scrambling to get financing.
The two main financing options are traditional lenders and private lenders. Getting financing from a traditional lender (a bank or mortgage company) is often a catch-22 situation, so many beginning investors opt to go with a private lender. Private lenders are individuals with plenty of cash who are willing to lend to investors.Typically, the interest is higher, but because it involves a private transaction, there are many more ways the deal can be structured.
Develop Your Strategy
Then, to get started in real estate investing in Phoenix, you need a strategy. Basically, this means deciding whether you want to buy, rehab, and flip or hold the property for rental income and growth. Each strategy, or business model, has its pros and cons, within these broader strategies are a series of sub-strategies, or niche business models.
These days there are a lot more creative options for financing and investing. One of the newest and hottest ways to gain access to the real estate investing arena is crowdfunding. What this means is that you alone don’t fund a development project or buy an entire property. Instead, by means of a real estate crowdfunding platform, you buy a small share of project or property. Your profit is smaller, but the financial risk is substantially less, and it takes far less capital to get started.
There are various crowdfunding platforms that offer varying risks and promise of ROI. The best policy is to use one led by qualified real estate investing professionals. You also need to be aware that your share of the crowdfunding isn’t generally liquid, so you can’t sell your investment if you need to raise quick cash.
If you’re looking to get started in real estate investing in Phoenix, you’re in good company. It’s one of the most common ways millionaires have been made. But getting started is, well, just a start. It can get pretty complicated (both financially and legally) pretty quick.
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