After watching Graham Stephan on YouTube, you may be thinking about investing in real estate, or even becoming a real estate agent or broker. Smart choice.
In terms of saving enough for a down payment to buy real estate, you’ll need to establish yourself to lenders. It's important to prepare accurate financial statements, so that banks will be willing to offer you a mortgage. Your journey begins with a good credit rating. Anything above a 740 generally gets the best lending rates. If you have a poor credit rating, your first challenge in buying real estate is to repir your credit. Further, have the last 2 years worth of tax returns in hand. This shows that your income is consistent and that you’ve built up a work history.
Bring bank statements and proof of income for the last 6 months. This way, you can prove how much money you’re actually making and spending. With that, lenders can calculate what your debt to income ratio is, Banks prefer those who save a lot, and spend very little. Ensure that you have sufficient cash reserves; up to 3 months of mortgage payments, taxes, insurance, and a buffer in liquid cash or assets.
Pretty much any time you buy real estate, you’ll need a down payment. Banks want to see that you have your own money at risk when you buy a house. This down payment forms your initial equity in the property. Generally 15-20% down, combined with a decent credit score, qualifies for a mortgage.
If you don’t put down 20%, you’ll generally need to pay PMI which stands for private mortgage insurance. This is an extra cost that helps assure the bank you’ll be making your payments, since the less money you have in the deal, the higher the risk is that the bank will lose money in the event you foreclose. If you can qualify lower down payments and the numbers make sense, go for it. But in more expensive markets, you’re going to need more money down. Some other options might be available like a VA loan where you can buy with 0% down.
The reality is that you’ll need to either cut back on your expenses as much as you can and save the difference, or work to increase your income. There’s no way around the math. When it comes to saving, keep your money stashed in a high-interest savings account. One strategy I like to use is to automate my savings. I have one bank account where all of my money is deposited and saved. Then I have another bank account for my expenses.
Because of the complexity of buying or selling a residential or commercial property, people often seek help from real estate brokers and sales agents. Real estate brokers and sales agents help clients buy, sell, and rent properties. Although brokers and agents do similar work, only brokers are licensed to manage their own real estate business. Sales agents must work with a licensed real estate broker.
Brokers and agents can represent either the buyer or the seller in a transaction. Buyers' brokers and agents meet with clients to understand what they are looking for in a property and how much they can afford. Sellers' brokers and agents meet with clients to help them decide how much to ask for and to convince them that the agent or broker can find them a qualified buyer.
Real estate brokers and sales agents typically must complete a number of real estate courses and pass a licensing exam. Although most brokers and agents must take state-accredited prelicensing courses to become licensed, some states may waive this requirement. In addition to offering prelicensing courses, many real estate associations have courses and professional development programs for both beginners and experienced agents. These courses cover a variety of topics, such as real estate fundamentals, real estate law, and mortgage financing.
To obtain a broker's license, individuals generally need 1 to 3 years of experience as a licensed sales agent. They also must take additional formal training courses. In some states, a bachelor's degree may be substituted in place of some experience or training requirements. State licenses typically must be renewed every 2 to 4 years. In most states, brokers and agents must complete continuing education courses to renew their license. To verify exact licensing requirements, prospective brokers and agents should contact the real estate licensing commission of the state in which they wish to work.
Ask yourself if you can see yourself being a real estate broker or investor. It's a competitive environment, having daily contact with buyers, other agents, and financial institutions. While classes and internships will prepare you well, certain innate qualities that you bring to bear will help you succeed. Real estate brokers must relate well with other people, and personal touches add to the overall impression that buyers remember most.
Most people want to invest in real estate early, although in the short term, there could be too much volatility to risk it. Patience and discipline here goes a long way, as you will need to save up your working capital long-term.
A time-tested real estate investor, Tarl has five crucial tips to share with real estate flippers of any experience level. These tips will help you avoid years’ worth of headaches and help you build a real estate portfolio.
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Brokers and sales agents earn most of their income from commissions on sales. The commission varies by the type of property and its value. Commissions often are divided among the buying agent, selling agent, brokers, and firms. Many real estate brokers and sales agents work more than 40 hours per week. They often work evenings and weekends to accommodate clients' schedules. Many brokers and sales agents spend a significant amount of time networking and attending community events to meet potential clients.
The real estate market is highly sensitive to fluctuations in the economy, and employment of real estate brokers and agents will vary accordingly. In periods of economic growth or stability, employment should grow to accommodate people looking to buy homes and businesses looking to expand office or retail space. Alternatively, during periods of declining economic activity or rising interest rates, the amount of work for brokers and agents will slow and employment may decline.
There are several choices for finding an apartment or share rentals online beyond Craigslist.org and Google. No matter which source you use to find housing, you should be aware that renting an apartment in most cases will require both a credit check as well as signing a rental contract, which may involve an application fee. Before you enter into any legally-binding rental contract, note the main elements such as the rental term, and what conditions must be met for your security deposit to be returned. Further, find out if you can sub-lease your apartment legally, or list a room on AirBnB.com to make extra money.
In the event that something breaks, like the toilet or water pipes, you may be entitled to hold off paying rent until the utilities are working again. If necessary, you can contact free legal aid in your community if you are served with an eviction notice. Be forewarned, renting a cheap place in a bad neighborhood to save money is often a bad bargain in the long-run, even if you purchase renter's insurance. The money you save on rent will be offset by hidden costs like stress, and concern about break-ins or personal safety.
When you purchase property insurance, shop around online for premium costs, policy coverage limits, and complaint information. Don't rely solely on the advice of insurance agents, as they're paid on a commission basis. Shopping for homeowners insurance is the single most important step you can take to ensure that you have adequate home protection. The dwelling limit should be the amount it would cost to replace your home. This may not reflect the current market value of your home, as homeowners insurance does not generally cover the land value of your property. Your insurance policy is not governed by the real estate market, but by the cost of the materials and labor involved in rebuilding your home, so insurance companies have developed formulas that they use to evaluate the replacement cost of your home.
Home warranties protect home owners from repair costs, such as plumbing, heating, and electrical repairs that aren't covered by homeowner's insurance. Home warranties don't overlap or replace the homeowner's insurance policy. For example, if your hot water heater burst and destroyed a wall in your home, the warranty would repair the water heater and your insurance company would pay to fix the wall and any floor damage. The age of your home usually doesn't matter, as far as warranty coverage is concerned, and you may obtain a home warranty, as long as the covered items are in good working order at the start of the contract.
The Department of Housing and Urban Development (HUD) is the federal agency responsible for national policies and programs that address America's housing needs, that improve and develop the nation's communities, and that enforce fair housing laws. The Department plays a major role in supporting homeownership for low-income families through its mortgage insurance and rent subsidy programs.
Offices within HUD include the Federal Housing Administration, which provides mortgage and loan insurance, and the Office of Fair Housing and Equal Opportunity, which ensures all Americans equal access to the housing market. The Community Development Block Grant Program focuses on economic development, job opportunities, and housing rehabilitation. HUD also administers public housing and homeless assistance.