Investing in real estate in the Dallas-Fort Worth (DFW) metroplex is a great way to build wealth and find financial freedom. After all, DFW is ripe with many newcomers moving to the area. Not all future DFW residents are ready to purchase a home yet, so they may choose to rent a house instead. DFW real estate is a hot commodity now and will be well into the future. If you are new to investing in real estate, you likely have many questions and aren’t sure how to get started. Here’s a checklist of everything you need to know to get started in real estate investments.
Deciding On The Type Of Residential Real Estate Investment
There are six main types of real estate that you can invest in. Most people choose long-term rentals because they are in high demand and usually offer the most steady passive income. Rental properties leased for six months or yearly allow you to plan ahead and know how much income you will bring in. If you don’t live nearby or want to remain hands-off on doing the maintenance and home repairs, you would need to consider using a property management service as an added expense.
Short-term rental properties are also a popular choice. Vacation rental properties, such as Airbnb, can be rented out weekly or for just a few days and even months at a time. While these types of properties may not bring the stable income that other types may bring (due to vacancies during off-season months), you can generally charge more than you would for a long-term lease to help offset that. You would also need to furnish these homes, which can be a big up-front cost. Additionally, more rental investment properties need regular cleaning between guests, so hiring a cleaning service would be another necessary expense.
Many DFW real estate investors love a bargain and consider it almost a hobby to buy a fixer-upper that they can flip. This requires hard work and additional expenses for building materials needed to renovate the home. But once the home renovations are complete, you will have a beautiful property that you can lease long-term or short-term. Or, you can sell the home for much higher than what you originally paid.
Additional Types Of Real Estate Investment Options
Not everyone wants to invest in residential real estate. Another great option is to invest in commercial real estate. This will typically cost more than residential property. However, it can bring in a significant return on your investment. Commercial properties are usually long-term leased properties without many vacancies, providing a more stable income.
Another option is to invest in vacant lots. If you are a visionary with big dreams, you may be able to find creative ways to build wealth by going this route. If you purchase a plot of land in the right area, you could attract businesses or developers who would love to utilize your space.
And finally, another option for investing in real estate is through Real Estate Investment Trusts (REITs). REITs are companies that own several different types of properties to invest in and allow outside investors to purchase shares of the properties. This option may be a great way to start real estate investing without directly owning or managing the property.
How To Determine A Good Rental Property
If you are a beginner, you will need to do a lot of research before taking the plunge on your investment. You will need a strategy and financial plan. It’s essential to know how to run the calculations to get an idea of how much income potential the property will bring in. While it may be impossible to know for sure your expenses, you will need to research and include the possible expenses into your calculations.
It’s also important to research the neighborhoods you are considering investing in. For long-term investment properties, you will most likely attract young families who are not ready to purchase a home yet. Researching the local school districts and other family-friendly amenities are a must so that you will attract the right renters. The DFW area has some of the best neighborhoods to raise a family and would be ideal for your investment. The millennial generation is also a great target market for your real estate investment. These are the young business professionals relocating to DFW for their job. DFW also has some of the top neighborhoods that will attract millennials who want to rent.
Financing Your DFW Real Estate Investment Property
Financing your investment property is generally similar to a standard mortgage financing process. You will typically need to put down at least twenty percent. There will be property taxes and homeowners insurance to factor in as well. The type of loan you need may be based on the type of property investment you choose. For example, a fix-and-flip loan might be a better option than a conventional mortgage loan if you intend to flip a fixer-upper and resell it rather than renting it out.
When you are ready to start searching for your investment property, working with a real estate agent would be very beneficial. They are your best resource for all of the legalities of the entire real estate process. Your real estate agent will help you find the best investment properties according to your budget. A real estate expert knows all of the neighborhoods and statistics that will help you make an informed decision throughout the entire process.
Questions on how to get started in the real estate investment process? Contact us so we can help!