There are numerous ways to start investing in real estate in Louisiana. You’ve probably read about flipping houses or watched a few reality TV shows where they purchase a 500k rehab property with the intentions of fixing it up and selling it at a profit. You likely have an acquaintance or two that have a rental home they inherited from a family member. While investing in real estate may seem like something that’s only for the wealthy, this guide will help you get started no matter your experience or current income level.
Investing in Louisiana real estate is just like anything else, you have to study the market, set goals and attack those goals to be successful. There are numerous ways to get your feet wet in real estate investing, but you have to weigh your options and choose the best investment vehicle for yourself and your family.
Here is a real estate investing self-assessment to keep in mind when deciding how to invest in real estate:
- Your preferences
- You and your family’s goals
- Market conditions
- Your knowledge of the real estate market
- Your income and debt level
- Credit score
- Establish with a real estate agent or Realtor
There are numerous other factors that you will need to consider, but the above list will give you a strong starting point.
If you’re new to real estate investment, you will have to consider how much time you have available to work on your investments. The level of involvement in real estate investments depends on which avenue you choose. If you prefer a hands-on approach and are handy with tools, you may be comfortable rehabbing houses and selling them for a profit. If not, you will need to hire a team to repair homes you purchase. If you don’t want to spend time and money to rehab homes, you can still purchase ready-to-rent properties and hit the ground running. It all depends on how much time you want to spend on your investments and which type you choose.
If you’re married and have a family, you may want to sit down with them and discuss your future before jumping into a real estate investment. It always helps if you have your spouse on board. You have to plan out where you want your investments to be in 5 years, 10 years and 20 years so you can plan accordingly. Take into account your age and where you are in your career when planning. Setting goals is one of the most important tasks in any real estate investment endeavor.
The real estate market fluctuates depending on numerous factors, but there is always a great opportunity for real estate investments if you know where to look. There will always be property buyers and renters no matter what happens with the market. The great thing about real estate investing in Louisiana is that you can always find an opportunity to make money, no matter what’s happening in the nation because Louisiana has a strong local real estate economy. However, that doesn’t mean you don’t have to be smart and cautious with your choices. You must always study the market and stay up to date with news.
Your Personal Real Estate Knowledge
Most people have a basic understanding of how real estate investing works, but there are a lot of things the average person doesn’t know. Thankfully, there are numerous real estate classes you can take that will increase your knowledge. It’s always worth investing in your education to become a better investor. Also, you never know who you will meet at real estate classes that can help you out later. You should be reading books as often as you can.
Your Income and Debt Level
The amount of money you make at your main job can directly impact what type of properties you can buy today. You don’t want to have too much of your income tied up into a property that may sit on the market for years. If you have a high debt level, you may not qualify for the best interest rates. Schedule an appointment with a mortgage specialist to see what types of loans you can qualify for based on your debt-to-income level.
You will want to build up your savings account as much as you can before investing in real estate. You have to be prepared for anything: issues with renters, unsaleable home, insurance company dragging their feet for home repairs, etc. A strong savings account can get you through the lean months.
You don’t want to empty your savings account to buy property. Leverage loans to buy multiple properties and spread your investments to diversity. A good credit score will qualify you for lower interest rates which can make a huge difference in the amount of income each property brings. Take care of any outstanding issues that may show up on your credit score to get larger home loans with better interest rates. This is where it’s important to establish great relationships with mortgage officers.
Find a Real Estate Agent in Louisiana
A real estate agent or realtor can be one of your biggest allies when beginning investing in Louisiana real estate. They can walk you through the process and help you find the perfect properties to purchase. Many real estate agents also work with renters and can help you find placements for all of your homes. Real estate agents in Louisiana have a huge network that they can leverage to help you grow your real estate investment business.
Now that you’ve completed the self-assessment, here are a Few Real Estate Investment Options:
- Rentals (Buy-and-Hold Strategy)
- Rehabilitate and Sell (Flipping)
- Rehabilitate and Hold (Future Rental)
- Commercial Real Estate
- Wholesale Real Estate (Buy Low)
This is the real estate investment strategy most people think of when discussing investments. You purchase a property and rent it out. The goal is to develop a cash flow from the renters to you that exceeds the mortgage payments, home insurance and other miscellaneous repairs. It can be a slippery slope if you don’t rent the property for much more than your payments and fees. Some homes will only bring in a few hundred dollars a month in profit, which is why it is good to purchase multiple homes. Another strategy often used is to put the entire amount of the renter’s payments towards the loan to pay it off quicker. You skip the profit and re-invest the money back into the property. The goal is to pay it off as soon as you can so you can enjoy a free-and-clear property and use the rental income as you wish.
You will be responsible for repairs on your homes. If you don’t want to be the one who shows up when something breaks, you can hire a property manager that will take care of it for you. This will cut into your profit, but can be a lifesaver.
Rehabilitate Property and Sell
Also known as “Flipping Homes,” this strategy may require a little extra knowledge or skillsets than just buying to rent the property. There are entire reality TV series dedicated to this technique. However, it is much harder than they make it look on TV. You either have to be able to do the work yourself or hire someone to do it for you. It helps to at least have some knowledge on fixing homes so you will know how to direct your team without getting fleeced.
One thing they don’t show you on TV is the element of risk. You really have to know what you’re doing to make a profit and you expose yourself to losing money in this type of venture. If you don’t know how to do it, you may want to hire someone to show you the ropes. Partner up with someone if you have to and split the profit.
The goal when flipping a home is to try to make a certain amount of profit, usually at least 20% to make it worth your time. Let’s say you purchase a distressed property at $250,000 and fix it up. You will need a cash flow to pay for repairs and updates before you can sell the property. You can set up a line of credit at your bank or have a hefty savings account to help with this part of the process. The beauty of rehabbing a property and selling for a profit is that you only have to do it a few times a year to be successful and it can bring a hefty income.
It’s important to keep in mind that when flipping homes, the longer you keep the property, the less money you will make in the long run. You will have to continue paying the mortgage until you sell the property. Many people live in the homes as they fix them up to save money. This isn’t for everyone, but can leverage large amounts of income when you do finally sell the property.
Rehabilitate Distressed Properties and Hold
If you have an eye for regional economic development, you may be able to pick out a great location that will be a hot spot in the future. You can spend time rehabilitating distressed properties in the right area for a huge payoff in the future. You may end up holding the properties until then, but can reap the rewards when the area begins to pick up.
Commercial Real Estate
Investing in commercial real estate can have multiple variations. You can purchase a corner store in a prime location, a family business that already has a customer base or a strip mall in a developing area. The types of commercial real estate investments are endless. One of the most popular aspects of commercial real estate is purchasing apartment buildings. Investors update the building, increase rents and build multiple income streams in one shot. A little work and you and your team can substantially increase the value of the property with a few updates. Holding an apartment building with long-term tenants in a good location is one of the best ways to profit from commercial real estate and build lifetime and generational wealth. If you hold a successful apartment building for years, you’ve established a history of high income with the bank and you will now be able to either sell it at a huge profit or take out a larger loan to purchase another one.
Buy Wholesale Real Estate
Purchasing wholesale real estate is exactly like any other wholesale business: You buy a property at a low price and sell it to a house flipper for more than your investment. Here’s an example: you find a distressed property and put it under contract for $250,000. You then sell your contract in that home to a house flipper for $300,000. You pay off the loan with the $250,000 and keep the $50,000. There’s not much work involved and you don’t have to rehabilitate the property or find renters. The house flipper that you sold the property to will likely make substantially more on the property, but he or she does all the work. You simply found the property and sold it without breaking a sweat.
Investing in real estate in Louisiana can be a lucrative endeavor. You can build a substantial income flow if you do the proper amount of research and partner up with the right people. Real estate investing in Louisiana can be fun and rewarding if you take your time and do it right. Research wealthy individuals and you will likely discover that they have real estate holdings in their investment portfolio. Investing in real estate has proven to be one of the best ways to build large amounts of wealth over a period of time. Start researching your local market and thinking like a real estate investor today.