Since money doesn’t grow on trees, the first thing to do when contemplating whether to become a real estate investor is to save your money. This can be the hardest part, it can take a long time, and it will make you consider switching to some get-rich-quick scheme instead of investing for the future… but it is so worth it in the end!
Dependent upon the type of property you are looking to acquire and the way you will finance that property, you may have to save anywhere from 0% to 30% of the purchase price plus closing costs – and that’s just to buy the property.
For your first home, there are amazing programs out there such as the FHA Loan Program or other locally sponsored programs that will allow you to purchase the property for little to no money down.
If you are a military veteran, the VA Loan is by far the best loan option, allowing you to purchase a home for no money down with nodded monthly mortgage insurance.
To obtain an investment property that you will not live in, however, you will likely have to pay between 20% to 30% of the purchase price, plus closing costs (approx. 6% of the purchase price), to finance the property with a lender.
This means that if you intend to purchase a property for$100,000, you will need, at minimum, $26,000 at the closing table. This, of course, can be a large sum of money if you are just getting started.
That is why we recommend that your first real estate investment be an investment in yourself— the purchase of your persona residence. Many programs allow first time homebuyers to obtain a property for 0%to 3% down and will even lump some of your closing costs into the loan amount, allowing you to save more money up front.
With the average homeowner only living in their homes for 8years, you will surely be able to rent your first home once your move on to something bigger and better. This is way better than having to pay rent somewhere when you know you will be in the area for an extended period of time(at least a year or longer).
Importantly, no matter your circumstances, you will need to save money to acquire a property. As you plan for future investments, calculate your monthly expenses, decrease those expenses where you can, and save, save, save! Before you know it, you’ll be a home owner and/or real estate investor!