How to make Real Estate investing numbers work.

How much money do you need to become a real estate investor? Probably less than you think. Having really good credit is a critical factor.  In fact, if you’re a first-time homebuyer, it would be smart to buy your first home with the intention of turning it into a rental. (You'd ideally live in it for at least two years — to avoid capital gains tax — while you save for your next home.) 

If you're past that point, here's what you need to get started:

1.  Down payment/closing costs (your Realtor® can estimate this number for you)

2.  Cash to cover three months’ worth of notes (estimated amount of time without a tenant)

3.  Cash to cover insurance, taxes, and maintenance of the property (here is where you really need to do some math)

Your fixed costs — insurance and property taxes — are fairly easy to estimate. Remember, should you do any major renovations to the property your property taxes could increase. 

Maintenance estimates should include electricity and water/sewer (to cover your months without a tenant) and repairs. Note that your repair costs will likely be experienced in the first few months of ownership, so a cushion for this is important. 

When calculating your mortgage remember that investors typically pay 1.75 percent more in interest than owner-occupied properties. But at today's rates, you're still in good shape. 

Since my husband and I began investing in 1997, the longest it has taken us to lease a residential property has been three months. Your success may vary. My advice? Remember this is an investment and you can be content with breaking even. Your payout comes later (historically, property values increase over time) when you eventually sell the property. 

NOTE: This article is intended for informational purposes only regarding the Acadiana area real estate market and does not represent a solicitation or an endorsement.  For tax advice, seek the services of a CPA or tax professional.