Real estate investing is becoming a popular investment option. Of the various asset classes, real estate has proven to be one of the safest and has great potential for high returns. Other benefits that come with real estate investing include leverage, tax advantages, and appreciation potential. As a real estate investor, your main objective is to make a profit. However, real estate investing is a dynamic game. To successfully begin your real estate career and stay ahead of the competition, there are some things you have to take into consideration. Those who manage to find lucrative real estate deals and make good money in real estate know these real estate fundamentals and apply them.
If you have been considering starting a real estate career, this guide will teach you basic things to know about real estate before you invest.
16 Things to Know About Real Estate Investing
In this real estate 101 guide, we’ll go through some of the most important things everyone needs to know about real estate to be able to make the right decisions and take full advantage of the benefits. Here are 16 things to know about real estate before you get started:
1. Location, location, location – Location is everything in real estate
When looking for a rental property to buy, it’s important that you first research real estate markets. The location of your rental property will have a huge impact on your return on investment. You want a real estate market that will meet the needs of your tenants and not your personal preferences.
If you are wondering how to choose a real estate market, here are some of the things you should look for:
- Good school systems
- Access to public transportation
- Low crime rate
- Nearby amenities
- Growing job market
- Good infrastructure
- Future developments
- Low insurance costs
- Reasonable property taxes
2. The real estate market is dynamic
One of the most important things to know about real estate is that it is ever-changing. It’s important to always stay up-to-date with all of the changes and trends in the real estate industry. For instance, if there are changes in buying and selling trends and you don’t stay in the loop, you risk facing major losses. Working with experienced real estate agents can help you stay up-to-date.
3. You can invest with little to no money
Many potential investors shy away from investing in real estate because they think it is only for the wealthy. They think that you need to have a lot of your own money to begin a real estate business. However, it is possible to invest in real estate using other people’s money. There are several ways you can finance your real estate investment without needing to use your own cash.
4. Real estate education is key
Real estate investing has lots of moving parts. Having a good understanding of the different aspects of the business will save you from unnecessary mistakes and give you peace of mind. You need to understand the basic real estate terms, the process of buying an investment property, real estate marketing, tenant screening, etc. Be sure to check out Mashvisor’s real estate investment blog to learn the basics of real estate.
5. A mentor can help you in your real estate investing journey
Even though reading real estate books and blogs is great for a beginner real estate investor, it does not equal learning from experience. Find someone with experience in real estate investing and offer to help them so that you can learn first hand from their transactions how it is done. Also, don’t be afraid to ask them any questions or for any assistance. Be sure you choose a mentor who is following a real estate investment strategy that you’re interested in. For instance, if you are thinking of becoming a landlord, find a successful landlord and learn from them.
6. A business plan is necessary
It’s important that you have a clear vision of why you want to invest in real estate and create a plan of action. Make sure your goals are specific and measurable. Having a comprehensive real estate business plan will make it easier for you to remain focused and track your progress.
7. A good real estate team is invaluable
There are so many things to know about real estate that it’s almost impossible to know everything before you get started. However, you can hire professionals to help you with different aspects of the business and make up for your inexperience.
This will not only help you avoid costly mistakes but also free up much of your time so that you can focus on more important things. You can only handle so much alone. Your team should include property managers, real estate agents, home inspectors, contractors, accountants, attorneys, etc.
8. Emotions have no place in real estate investing
When it comes to buying rental property, don’t just go for something because it appeals to you emotionally. Buying an investment property differs greatly from buying your primary residence. After all, you won’t be the one living in it. You need to check if the numbers make good financial sense. This will keep you from getting into a bad real estate deal.
9. You make money when you buy
Always focus on getting a good deal when you buy real estate and not banking on repairs for profit. Some repairs may take too long or be too expensive.
10. Cash flow is king
As a beginner real estate investor, you should focus on creating cash flow. If you buy a positive cash flow property, you will have some profit every month and you’ll be able to build your portfolio over time. However, when an investment property is negatively geared, you will be forced to reallocate money from other sources to offset the difference.
11. Focusing on one real estate investment strategy at a time is best
When you are just getting started in real estate, it might be tempting to try out everything. This way, it is easy to get distracted and lose focus. Choose one real estate investment strategy and focus on it until you master it before trying something else. Don’t try to do everything at once. For instance, if you choose Airbnb real estate investing, focus on learning all you can about it. Once you have become good at it, you can move on to another strategy if you want.
12. Real estate investors need to be prepared for the worst
When investing in real estate, you need to plan for the worst in advance. There may be economic downturns, rising mortgage rates, unexpected repairs, or vacancies that can negatively impact your cash flow. This means that you need to have a financial reserve to handle such unexpected issues.
13. A home inspection is an important step of due diligence in real estate
Even if an investment property seems to be in pristine condition, you should never skip inspections. While inspections can be costly, it may cost you more if you skip them. A professional home inspector will help you estimate the cost of repairs before you make an offer.
14. Starting small will help you succeed
If you are still a novice, it is advisable that you start with a small and manageable investment. As you improve your real estate knowledge and experience, you can invest in bigger and more expensive rental properties. Taking baby steps will help reduce the risk of losing big amounts of money due to your inexperience.
15. There are real estate investment tools that can help
Analyzing potential investment properties manually or through spreadsheets can be time-consuming. Luckily, with the advancement in technology, real estate investors can quickly and accurately conduct investment property analysis using a variety of real estate investment tools. These tools make decision-making easier and better. You can find some of the best tools here at Mashvisor. Sign up now to try them out.
16. Getting pre-approved for a mortgage is important
Getting a mortgage pre-approval prior to finding an investment property is very important. It shows the property seller that you are a serious buyer and can also help you in negotiations. Lenders may also lock in an interest rate for you. Even if interest rates rise when you are doing your property search, you will still be able to enjoy the lower, locked-in interest rate.
The Bottom Line
The idea of beginning a career in real estate can be daunting. However, investing in real estate can be a smart decision if you know what you are doing. While there is always a risk of financial loss, having sufficient real estate information can help you mitigate risk and help you maximize your return on investment. By knowing the tricks that the pros use, you will be able to get ahead of the competition. Armed with these tips, you can successfully begin your journey in real estate investing. Be sure to use Mashvisor since it’s the best software for everything real estate.
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