Real estate investing can bring in big returns and help you grow your net worth. Despite its potential financial rewards, becoming a real estate investor can seem like an intimidating idea to some people. However, with the right knowledge and tools, anyone can do it.
There are some basic fundamentals you will need to understand before you get started. Here are some helpful tips on how to become a real estate investor:
1. Get Educated
The first step to becoming a real estate investor is to get adequate knowledge of the real estate business. As a first-time real estate investor, you need to learn about the real estate market, the process of negotiation, and all details involved in buying, fixing, and renting out properties.
For instance, if you plan on investing in rental properties, you will need to learn about the laws and even the average rents for the area. You should also learn about the risks involved in becoming a real estate investor. Every type of real estate deal might have different risks. In short, before buying your first investment property, you should ensure that you know the ins and outs of the business.
Education does not necessarily mean getting a four-year degree. You can read books, blogs, and talk to real estate agents or mentors about various aspects of the business.
2. Select a Niche to Start In
With the many niches to choose from, becoming a real estate investor may be a little confusing. It can be overwhelming if you try to jump into many different types of investment properties. With such confusion, you are likely to make poor decisions.
It would be much better to start with one niche. For example, you may decide to go for house wholesaling, commercial, residential, or even flipping real estate. After mastering one niche, you can then try a different niche. It is impossible to specialize in everything at once. A jack of all trades is a master of none.
3. Create a Business Plan
Just like every investment career, writing a business plan is a crucial step in becoming a real estate investor. You should treat real estate investing as a business and not a hobby. Set your investment goals and how you plan to achieve them.
For instance, if you aim to purchase distressed properties for flipping, your plan should define the market you intend to buy in and why, your limits for acquisition costs, budgets for rehabilitation, and your target sales prices with a time period for each. You can use an Airbnb calculator to see how the associated costs and expenses will impact your property’s profitability.
After writing your business plan, you can share it with your mentor and make any necessary adjustments.
4. Secure Your Real Estate Financing
Becoming a real estate investor is hard if you don’t have funding. Real estate financing is often a huge concern for a first-time real estate investor, especially if they don’t have cash.
However, it is possible to acquire financing if you know where to look and what to do. There are many options available, such as mortgage loans, owner-occupied loans, hard money loans, and private money loans. You can also consider partnering with investors that are more experienced and have funding but lack the time to execute a new property investment.
You should ensure that you clean up your credit, build your credit score, and try to develop good relationships with lenders. Apart from a good credit score, lenders usually want a down payment of at least 20 percent.
5. Network
Since real estate is a people business, it is critical to get out there and network with professionals and other real estate investors. Work to build a team that will assist you in your journey of becoming a real estate investor. You should start getting them on board before you begin investing so that they can help you during the process. Some of the most important contacts you will need may include real estate agents, real estate attorneys, contractors, property managers, vendors, banks, and lenders.
The kind of people you will need will depend on your business plan. What they offer should be in line with what you want. For instance, you should hire a real estate agent that specializes in working with real estate investors and not homeowners. You can find such contacts by asking for referrals from other successful real estate investors. You can also find them on various online platforms, like Mashvisor.
6. Find the Best Real Estate Deals
Becoming a real estate investor also requires that you know how to buy investment property. However, not every investment property for sale will have a positive cash flow. So, there are some things you should do when buying an investment property if you want to be successful. To find the best income properties in the US housing market 2019, be sure to conduct real estate market analysis and investment property analysis.
Real estate market analysis will help you in studying the local housing market. Buying a rental property in a good location is crucial to your success as a real estate investor. Investing in good neighborhoods will ensure that your property has a high tenancy rate since there will be more potential tenants. A good location will also offer more opportunity for appreciation.
On the other hand, investment property analysis will help you in choosing the right rental property by calculating performance measurements of various investment properties.
Not sure where to start with your real estate investment analysis? Try Mashvisor’s real estate tools. They will surely help you on your journey to becoming a real estate investor.
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.
Bottom Line
Becoming a real estate investor requires a lot of research, having a plan, using the necessary tools, and proper execution. Because real estate investments can be of high value, they naturally can come with a lot of risks. So, it is important to be strategic and not emotional like a typical homebuyer. You need to dedicate sufficient time, energy, and money to be successful in the field. Mastering the business can lead to great profits and growth of your net worth.