• by The VRET Team

How to Invest in Oklahoma City Real Estate: A Complete Guide

When you start looking for lucrative forms of passive income, one of the first things you’ll run across is real estate investing. Real estate investing can be a fantastic way to make money if you handle it right. Rent payments can be a solid form of passive income, and flipping houses can be risky but profitable.

If you’re planning to start a real estate empire, there are few better places to do it than Oklahoma City. Read on to learn more about Oklahoma City real estate and how you can invest in it today.

Why Oklahoma City?

Before we dive into how you can start building your real estate empire, let’s talk some about why you should do it in Oklahoma City. Oklahoma City is a thriving metropolitan area that’s growing and building a robust economy. Unemployment in this area is below the national average, real estate values are on the rise, and rent prices are going up. 

Oklahoma City is working hard to bring in new developments that will improve its citizens’ quality of life. Oklahoma law also tends to protect landlords over tenants, making it a great area for people who want to rent out properties. And the strong demand for rental properties in Oklahoma City makes it a lucrative area to start investing in real estate.

Buy REITs

When you first start investing in real estate, you may not have much capital to bring to the table, and you’ll want to keep things small. Investing in real estate investment trusts (REITs) can be a great way for you to start making real estate money without owning physical property. These trusts can turn out high dividends, making them a great option when you’re just starting. 

When you invest in a REIT, you’re giving money to a company that owns office buildings, retail spaces, apartments, and hotels. Because you’re helping to pay for these properties, you get a portion of these companies’ proceeds back from the properties. While you can use this money as income, you may want to consider reinvesting that money to grow your real estate business. The difficulty here is deciding what type of REITS make sense for you. That’s where having a trusted advisor is critical to make sure you are investing the right REIT for your goals.

Use an Investing Platform

Another great way to get real estate investing benefits without the hassle is to use an investing platform. Websites such as LendingClub and Prosper allow investors to put their money into projects that real estate developers are working on. In return, they can receive monthly or quarterly dividends once those properties start making money.

Investing platforms aren’t as safe as REITs are. However, you take on a significant risk of just losing your money. These platforms may also have limitations on who’s allowed to trade on them. You may need a household income of $200,000 or a personal net worth of $1 million to even qualify for these platforms.

Do Short-Term Rentals

If you’re wanting to dip a toe into the waters of more hands-on real estate investing, you may consider doing short-term rentals. Platforms like VRBO and Airbnb make it simple for homeowners or even tenants to rent out their space for short periods of time. This can be especially lucrative if you live in a high-demand area. 

If you’re renting a space, make sure you check with your landlord about whether the terms of your lease allow you to rent out your home. You’ll also need to make sure you have a plan for where you’ll stay while you have guests in your house. Having a clean home and great interior design can help you make as much money as possible on these rentals.

As always, you want to make sure you have the time and resources to sustain a full-time project. Short-term rentals can be a lot of work and rely heavily on your ability to provide an amazing experience for your renters.

Become a Landlord

For those of you who are ready to go further into real estate investment but who may not have the capital to pay cash for a house, you may want to consider becoming a landlord. Like short-term rentals, you’ll be leasing out some or all of your property to a tenant. But unlike Airbnb arrangements, these leases will go for several months or even a year.

You can become a landlord without having to buy an entire house outright and pay for your own living space. Consider getting a multi-family home, living in one half, and renting out the other half. You get half your mortgage covered, maintenance is extremely convenient, and you get a profit to put towards future investments. 

Flip a House

If you’ve watched more than three episodes of any HGTV show, chances are you’ve considered flipping houses. The before and after shots are so satisfying, the budgets always seem to work out, and the profits are stellar! Flipping a house can indeed be a great investment if you manage things right.

Flipping houses involves buying cheap houses that need a little love, fixing them up, and selling them for a higher price. In essence, you trade your time, labor, and resources for a higher profit on the house. If you have experience working on houses and a lot of money to spend upfront (and a high tolerance for bad smells), flipping may be a great option for you. However, you have to be aware of the costs. It may look easy, and seem profitable but even professionals have lost money while attempting to flip a home. You need to make sure you have the time and reserves to maintain a full-time job as a flipper.

Pay Off Your Home

Before you start investing in real estate of any sort, it’s an excellent idea to pay off your home if at all possible. When you still have your own mortgage, it can be hard to build the capital you need to invest in a real estate business. Any money you make on your investment will go back into your biggest real estate investment: your home. 

Aside from the financial concerns, you should view your own home as your number-one real estate investment. You’re working towards owning a home that is hopefully appreciating while improving it and adding more equity. If you handle it right, your home could become a huge profit source when you get ready to sell.

Diversify Your Wealth

The other thing you need to do before you start your investing career is to diversify your wealth. As we’ll discuss in a moment, it’s important to have a backup plan before you dive into any investment project. Investments come with risk, and you need to have the financial standing to handle the unexpected when it comes around.

Make sure you have a solid wealth base that’s diversified across several different investing platforms. You should have retirement accounts, stock profiles, and other long-term investment opportunities. Once your nest egg is a little more spread out, you can consider adding real estate to your basket.

You Don’t Have To Keep It Local

When you start shopping for houses to flip or rent, you don’t have to only look at properties near you. You can explore lower-price markets that are out of state, or even out of the country. If you live in the Pacific Northwest, you could buy a house for a fraction of your market price in Oklahoma and flip it for a solid profit. 

Trying to manage a property, either to flip it or rent it that’s a plane ride away from you, is going to be a challenge. But if you have a real estate specialist that has a total turnkey operation including property management, you can minimize your risks. Shop homes within any distance and hire a trusted partner that will keep a close eye on your investment properties in a market that they know.

Focus on Appreciated Value

No matter what sort of real estate investing you’re doing, you need to let your focus be on the appreciated value. In simple terms, appreciated value is the value that an investment gains during the time you own it. So if you buy a house for $100,000 in a market that’s on the rise in five years, you may have $25,000 in appreciated value in it and be able to sell it for $125,000. 

In general, you can expect real estate properties to continue to appreciate over time. To make the most of this, try to invest in areas with property values on the rise. You want to get in early in a market that’s going up in value and ride that bubble to the top before you sell for maximum profit.

Important: Keep your cash flow positive. A negative cash flow and vacancy can erode your return on investment. A combination of both appreciated value and positive cash flow will add to your long-term wealth building. What you sell should have a  greater depreciation schedule that offsets your positive income and the “loss” is carried forward. 

Know Your Taxes

You may not be surprised to learn that you’ll have to pay taxes on the money you make from your real estate investments. But depending on what sort of investment you choose to make, you may have to pay a few different kinds of taxes. 

When you sell a piece of property, you’ll have to pay taxes on the money you made off that sale. If you’ve owned the property for more than a year, you’ll pay long-term capital gains tax – usually around 15 percent. If you’ve owned the property for less than a year, you’ll pay short-term capital gains tax, which is taxed as a part of your standard annual income.

Make a Plan B

You can count on when you start investing in real estate because things will not go according to budget. An inspection of the house you’re flipping will reveal lead pipes or a foundation problem. Your renters will call and inform you that the water heater just broke and flooded their house.

You must plan and prepare for the unexpected in your real estate investments. Plan to set aside a portion of every rent payment as an emergency fund for repairs and maintenance on your rental properties. Give yourself a pad in your budget for when things go wrong at the house you’re flipping so you stay on budget. 

Start Small

When you’ve been binging HGTV for three days, it can be easy to want to dive in and start making money. After all, these people are buying all sorts of homes and selling them three months later for a $50,000 profit! How hard can it be to slap on a few coats of paint and cash in your check? 

But all real estate investing is a lot more complicated, risky, and challenging than they make it look on TV. Make sure you start small, both with your financial investments and with your labor commitments. Start with some of the online real estate investment opportunities we’ve discussed; if those go well, reinvest that money into larger projects. 

Know Your Stuff

It’s essential that you know what you’re getting into when you start investing in real estate on the subject of flipping houses. Demoing a house, hanging sheetrock, and picking paint colors may seem simple enough on the face of it. But there’s a lot of hard work and years of training that go into flipping a house.

If you want to start flipping houses, consider doing a few projects on your own home first. Ensure you have a good set of tools and know-how to use them and always put safety first. If you dive in with no experience or know-how, you’ll find yourself hiring a contractor to finish the job for you. 

Start Investing in Oklahoma City Real Estate

Investing in real estate can be a lucrative way to grow and diversify your wealth. Because real estate values consistently go up, you’re likely to make a good profit on your investment if you handle the project well. And from investing in REITs to flipping houses, there are tons of ways to get involved in Oklahoma City real estate investing. 

If you’d like to start establishing your real estate empire, check out the rest of our site at The Virtual Real Estate Team. We help investors to grow their wealth with real estate in Oklahoma City. Schedule an appointment with us today and start growing your nest egg so you can achieve financial security and retire on your own terms.