Real estate is a hot commodity right now, to say the least. That makes it a competitive market, which also makes it a great time to invest.
Whether you're thinking of investing in commercial property, hoping to flip a house or wanting to run a rental, there's a lot to learn and keep track of. Brokers and realtors exist for that very reason—to help you understand the complexities and guide you toward your best bets.
If you've never invested in real estate, however, it can be hard to know where to even begin. That's why we turned to the experts at NAI Wisinski of West Michigan and Greenridge Realty for insight on entering the wide world of real estate and investing wisely. Here are some of their top tips.
You need spare time and money.
As Mary Anne Wisinski-Rosely of NAI Wisinski of West Michigan told us, "These need to be funds that don't need to be readily available. It's possible to take several months to sell an asset." And that's just the initial investment.
Whether you're flipping houses or investing long-term, you also need a reserve of funds on hand "in case a furnace, water heater, roof, stove or anything needs replacement or repair," said Katie Stein of Greenridge Realty (at the time of this article's publication), adding that a rental requires everything your main residence does, plus a little more. "Anyone can consider real estate investment, but you do need to be prepared for the investment of time and finances."
Come in prepared.
It's not just about having time and money, but knowing exactly how much of it you have to spare. Wisinski-Rosely suggests approaching a broker with what you can afford and how big of a property you want. If you have extra time, you can save money on smaller properties with DIY work. If you have plenty of money, you can save yourself lots of time by hiring a property management company to do the hard work for you.
You absolutely want to connect with an expert.
In terms of commercial real estate, Wisinski-Rosely said, "A broker can advise the buyer on what similar properties have sold for and if the return on the investment meets their objectives. They can also advise what due diligence is necessary to purchase a property and direct them to other advisors to assist in that process."
Brokers can also help connect you with properties before they even hit the open market. Stein emphasizes that because there's so much to consider when choosing a property, experts are necessary. They can help answer your many questions, such as how a short- or long-term investment will affect your tax liability; how much effort a property will require; finding a property in your preferred area—whether it's emerging or more established—and how that affects your purchase price and rent; dealing with homeowners' associations, etc. And those are just a few examples!
Be patient and cautious.
Wisinski-Rosely points out that there's currently a low supply of investment properties in the market available for purchase, which means it could take time to find the right property and you may have to be flexible (much like people buying homes right now). Stein, meanwhile, brings up two adages from her grandfather and great-great-great grandfather:
1. "Don't risk more than you are willing to lose." Pretty self-explanatory and sage advice for any type of investing.
2. "You never go broke making money." Rent might be $800 a month for years. A market change might drop or raise that number, but as long as it's positive, you're still doing well: You're making money!
You shouldn't rush an investment property purchase, Stein adds. "Let it find you ... and by that, I mean let your agent find it for you! I've personally done quite a bit of investing in the last few years and rarely was I looking. Good investments were always on my radar, but I was not on the hunt."
The market is shifting.
Stein tells us that while prices might be stabilizing, interest rates are rising, meaning it's a wash for buyers in many instances.
"Interest rates are also higher for second homes than primary residences and you also often have to bring a bigger down payment," Stein explained. "For cash buyers, the game has not changed much, but they may enjoy a little less competition and lower purchase price. For those financing investment properties, I think the barrier to entry might be a bit higher."
Written by Josh Veal for West Michigan Woman.
This article originally appeared in the Dec '22/Jan '23 issue of West Michigan Woman.