OKLAHOMA CITY – The booming real estate market makes this a great time to become a property investor – if you have the knowledge to be successful.
“Housing market values are on track to continue to rise significantly over the next year,” said Angelena Harris, managing broker at Spearhead Realty. “There are many things to consider when looking for a potential investment property, and the best way to learn the ins and outs is to meet with people who are successfully buying properties.”
Harris and her husband, Ron, began investing in 2007 by buying rental houses. “We made money and we lost money,” she said.
“The best advice told to me was to go find your local real estate investor association. Ours is Millionaire Possibilities,” Harris said. “In Oklahoma we have one of the best investment communities out there.”
There are plenty of pitfalls when buying a property that needs repairs, and learning the hard way can be very expensive.
Frugal new investors might skip steps – like getting a title insurance policy – to save money, Harris said.
One investor decided to skip an inspection and learned too late the house was infested with termites. “The whole house had to be gutted,” Harris said. “That was a $40,000 to $50,000 mistake.”
She advises investors to “never borrow more than 80%” of the purchase price and to look for property in opportunity zones, where the houses will appreciate in value when businesses come in and create jobs.
Underestimating the extent and cost of renovations and repairs is another big mistake inexperienced investors can make, especially with the high cost of construction materials now, she said.
What if the windows don’t close and lock properly and must be replaced before the house can be rented? Beyond the cost, the backlog of windows in the supply chain could mean a seven-month wait with no rent coming in.
Turning around property purchased at a tax sale could take even longer if it turns out there’s a problem with the title. “You can’t sell or finance the house until there’s clear title,” Harris said. And if you renovate it first and the old owner or an heir comes back and pays the back taxes, that is the only amount you get back, she said.
These are the kind of lessons fellow investors offer for free in weekly and monthly meetings, Harris said. New investors also can hire a coach to teach them how to navigate the market.
Harris and her husband offer a six-month training program that covers real estate investing, tenant screening, wholesaling, marketing, finding properties, rehabbing, how to set up your business structure, bookkeeping and more.
“You have to learn some time,” Harris said. “Now is a good time to get a few properties under their belt before the correction happens. No one knows when it will happen, but it’s inevitable.”
As mortgage rates rise and sales and prices eventually drop, it will be harder for someone new to investing to get financing from a conventional lender, she said.
“If you have experience in the market, then you will still be able to get financing in down times.”