The idea of making money with Southern California real estate isn’t a new one. There are many ways you can invest and be successful. But no matter how you choose to invest, there are some things you need to know before investing in Southern California.
Many people decide to start real estate investing, yet not everyone is successful. To be successful in real estate investment, you need to educate yourself and never stop. Real estate investment is like having a new career. Learn as much as you can, and it will give you the “edge” on everyone else who are barely getting their feet wet.
Know What You Can Really Afford
Even if you aren’t using traditional bank financing, you can use some of the same formulas the lenders do to help calculate the affordability of a home for yourself.
One thing a lender will look at right away is your “debt-to-income ratio.” This ratio will look at all of your debts per month versus how much you are bringing in. For example, let’s say you make $6000 per month and your expenses are $2200 per month. Your debt/income would be .36 or 36%.
To take this ratio further, lenders will look at front and back-end ratios. The front-end ratio states that your total housing payment should not be more than 28% of your total income. This includes the mortgage itself, taxes, interest, and insurance. The back-end ratio looks at all of your debts for things like car payments, student loans, and your housing payment. Lenders like to see this number lower than 36% of your monthly income.
After you consider these ratios, take a look at all the other factors in your life. Do you love shopping? Dining out? You should ask yourself how much of a lifestyle change you are willing to make in order to reach your investment goals. Know your limits, and don’t over-extend yourself when buying real estate in Southern California.
Know Your Long And Short Term Goals
What is your ultimate goal for this investment? Do you want to quickly flip to see a fast profit? Or do you want something to buy and hold, with the likelihood of a higher appreciation over time? Knowing what you hope to gain from the property will help you determine which property to buy. Not every piece of real estate will perform in the same way.
What other goals and aspirations do you have in your life? Other factors will have an influence on the property you purchase. How do you envision your future? Will there be a large family? A return to school? Do you want to spend time traveling the world? These things can help you determine if you should purchase a hands on or hands off investment.
Know Your Exit Strategy
As an investor, you will probably sell the property at some point, possibly to pursue another investment opportunity. What factors will help you determine when the time is right to sell? Will the house appreciate to a certain value? Will the returns peak at a certain point? Have a plan in your head along with a “plan b” to ensure you don’t find yourself stuck with a bad investment.
Set limits for yourself and know when to walk away from a bad investment. Have a plan to sell, or otherwise use the property if the returns aren’t coming in as you had hoped.
Know As Many People As Possible
To be successful in Southern California real estate investment, networking should be one of your main objectives. Finding the best properties before other investors and being able to gauge market conditions are two of the greatest assets when buying Southern California properties. Knowing the right people and working with companies such as Ryan Buy My House, can help you be at the forefront of the local real estate market.