What To Expect as an Initial Investment in Residential Real Estate

how much do I need to invest in real estate

Real estate investing is exciting and lucrative when done correctly, One of the first questions people have about real estate investing is ‘how much money do I need to invest?’. While there are many different real estate strategies out there, the one we’re going to focus on is BRRR, or buy, renovate, refinance, rent. This is a long term strategy that is ideal for building long term wealth

To get started with this type of investment, an individual will need to have enough capital to cover the 20% down payment as well as funds to restore the property. Depending on the type of property you’re looking at and the scope of the work needing to be done this amount can fluctuate greatly but a good range would be $150,000-$200,000. Aside from having this money available, you need to be comfortable with investing this money long term. A typical BRRR investment will take anywhere from five to ten years to complete. This allows you to pay down the principal balance on the mortgage while also building equity as the property value increases over the years. There is a chance you can recoup your initial investment early depending on how much rent you’re generating each month, but it’s best if you are comfortable with your investment being locked in for the full time.

If you’re a more seasoned investor and already have at least one rental property, you may be able to secure money for a down payment and renovations on a new property by refinancing and borrowing against your initial investment. The renovations performed on a property increase the value combined with paying down the balance and the property’s appreciation over time. This provides you with equity you’ve grown and can borrow from in order to finance new investments. So now you may not need to have the 20% down payment as cash in the bank but may be able to borrow against an existing income property to fund your new venture. This is the power of investing in real estate.

Now, if you’re not a seasoned investor you may be wondering how you’re supposed to come up with the initial investment so you can get started. This is a time when you need to take a look at the investments you already have a take a hard look at how they’re performing. For instance, do you have money sitting in a savings account or mutual fund? Have you taken a hard look at how those investments are serving you? Is your money actually working to build your long-term wealth or is it just sitting there, earning pennies on the dollar and making the bank a lot of money? Often, when people put money into these accounts they’re not even sure the rates they are earning and what that investment will look like over time.

Another thing to look at is your return on stocks and bonds. Are they performing well and yielding you a return you feel satisfied with? Is the amount you’re earning enough to make a strong impact on your financial future? If it’s not, pulling money out of stagnant options to invest with a real estate partner can be a great option. Again, you need to decide what you want your prospective wealth to look like. This type of real estate investment is for those looking at the big picture who want to ensure their financial well-being for themselves and their family for years to come.
Real estate investment is all about securing your financial future and playing the long game. The best thing you can do is ask yourself where you’d like to see your investments in the next five to ten years and what type of returns you’d like to see. You want to ensure the money you are putting out is going to work for you so you can grow and build a solid financial foundation. Once you secure the capital for your initial investment property you can really make your investment and money work for you if you wish to secure your holdings.

Have more questions about partnering to invest in real estate? Drop us a line at info@artolinvestments.com

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