Thinking of entering the real estate field and starting a career as an investor? That’s great, but one thing you need to know is that real estate investing is not as easy as many advertise it to be. Yes, it’s one of the best ways to become wealthy, but it’s still a challenging business. It takes lots of planning, research, and skill to invest in real estate and obtain the financial rewards that everyone desires.
However, the great thing about it is that once you know how to get started, you can easily overcome these challenges and succeed. We’ve laid out 8 simple steps to becoming a real estate investor that you can use in order to buy your first rental property, grow your portfolio, and become a successful investor!
To learn how to become a real estate investor in no time, watch out video below:
Step 1: Get the Real Estate Education
Real estate investing is complicated, and many beginners give up because it is tough to figure out. That’s a good thing because it leaves more investment opportunities for those who are truly willing to put the work in. So, the first step to become a real estate investor is to learn the ins and outs of the business. I mean, as with any career, you can’t really be successful without having sufficient knowledge first.
So, before buying your first investment property, you need to understand the housing market, financing options available for property investors, different investment strategies for beginners, risks involved in investing, and more. It’s also vital to stay up to date with the laws, regulations, terminology, and economic trends that affect the real estate business.
Luckily, there are many real estate websites, YouTube channels, books, and even coaching programs that teach beginners all they need to know before getting started. Check out Mashvisor’s real estate investment blog to learn anything and everything real estate. Read through detailed step-by-step guides, tips and tricks, and market reports all in one place!
Step 2: Build a Real Estate Network
For someone learning how to become a real estate investor, you’ll realize that it’s even more challenging if you were to do things on your own. This is why successful investors are those who’ve built a real estate network. After all, this is a people business. The sooner beginner property investors realize this, the better foundation they will have when starting out.
A good network provides important support and creates better investment opportunities for both beginner and experienced real estate investors. Why not have a professional help you out rather than risking time and money tackling a problem on your own? Plus, successful investors know that embracing other people’s expertise is worth the additional costs. Typically, a real estate network should include:
- A mentor to teach you about becoming a real estate investor based on experience
- An agent to help you find investment properties for sale and close deals
- An accountant to handle real estate taxes
- A lawyer to keep you updated with the laws and regulations in the housing market
- A home inspector to examine properties for any defects or issues that may cause problems
Step 3: Create a Financial Analysis + Plan
When you’re investing in rental properties, you’re dealing with numbers. Therefore, first-time real estate investors must analyze their finances and set short-term and long-term goals before buying a property. This will help you plan how to reach those goals and, most importantly, constantly keep track of your budget which is vital for making money in real estate.
One of the biggest challenges for most people who want to invest in real estate is finding the money to do it. But another great thing about the real estate business is that whether you have lots of or little money, you can still invest. And a financial analysis will help you find out the best way to finance your investment property and how much you can afford to buy. There are mortgage loans, private money lenders, hard money lenders, etc. Moreover, there are even ways to invest in real estate with no money down! This includes seller financing, house hacking, and starting off with a different investment strategy that takes less money than buying rentals.
Finally, you should include your overall financial goals in a real estate business plan to make sure your property investment will deliver those. A business plan also allows investors to visualize the big picture of real estate investing, which helps maintain focus on the goals rather than on any minor setbacks.
Step 4: Choose a Good Investment Location
One of the first things you’ll learn when you get started as a real estate investor is the importance of location in this business. The location will basically determine the level of your investment’s success. This is why it doesn’t always make sense to buy investment properties for sale near you as your local housing market may lack the features of a profitable location. So, what are the features to look for to identify the best places to invest in real estate? These include:
- The current housing market trends like population growth, the unemployment rate, and mortgage rates
- Property prices, rental rates, and the price-to-rent ratio
- Home construction and opportunity for development
- The market’s real estate appreciation rate over the years
- Tenant occupancy and vacancy rates and more
Researching the investment location before buying a rental property there enable you to predict where the housing market is heading in the future. To become a successful real estate investor, you should pick a location strategically and don’t put your attention on the price alone. Experienced investors know that it’s best to invest in real estate out-of-state if a location offers better investment opportunities and room to grow your business.
Step 5: Settle on Your Investment Strategy
There are many ways to make money in real estate. You can buy a property and rent it out traditionally or rent it out as a vacation home rental to short-term guests, thereby implementing the buy-and-hold strategy or you could go for a fix-and-flip. There are also strategies to make money without even buying an investment property. Some of these investment strategies include REITs, house wholesaling, and house hacking your personal residence. So there are numerous ways for any real estate investor to profit from real estate, but you need to focus on one strategy to kick start your career.
Some beginners think that simultaneously renting out vacation homes and flipping houses, for example, will help them become richer sooner. However, success stories prove that this is not the case. Taking the time to build a level of understanding of a specific strategy – or niche – is essential to long-term success. On the other hand, trying to master multiple strategies at once from the start will only add stress and won’t make you a millionaire real estate investor. Once you’ve become an expert on a certain investment strategy, you can move on to another one as a way to diversify and grow your real estate portfolio.
Step 6: Find the Perfect Investment Property
After settling on how to get started in real estate investing, it becomes easier to search for properties in the housing market that fit with the investment strategy. Another tip to narrow down your search is to decide which type of property you want to buy. For example, are you looking to invest in a single-family home or a multi-family home to rent out traditionally? Perhaps you’re more interested in a condo or a beach house to rent out on Airbnb. Or you might be a house flipper and, in this case, should be searching for a cheap, distressed home to renovate and sell.
As you can see, your investment strategy and budget determine the type of property you should look for. There are multiple ways to find homes for sale, but you need to remember that not every home you find makes for a profitable investment. So, in order to choose wisely and buy the right property, you need to do an investment property analysis. This lets you calculate the return on investment that the property will bring, which is vital to every successful real estate investor.
Alternatively, you can ditch the math and quickly find the best investment properties in your city of choice with our Property Finder. Using filters, you can set your search criteria and this investment tool will show you property listings that best match what you’re looking for. The listings will include those with the highest ROI in the market! Sign up for a free Mashvisor account to see for yourself.
Step 7: Conduct a Rental Market Analysis
This step is important if you’re investing in real estate rental properties. Essentially, you want the property to generate positive cash flow (rental income – rental expenses). This means your rental income needs to be high enough to cover the rental expenses and leave a profit margin that goes into your pocket. To find out if your rental property is profitable in this regards, you need to do a rental market analysis (RMA).
This will help you assess whether or not the entire area is good for rental property investment. Typically, property investors look for the average rent in the housing market and compare it to the average costs of properties. If the rental market analysis is positive (meaning average rents are higher than average costs), then a rental property investment should yield positive cash flow.
Doing this before making the purchase helps investors ensure profitability and avoid unpleasant surprises after closing the deal. Furthermore, you can do a rental market analysis after buying as it helps you find a competitive price to charge for rent. It’s best to use an Investment Property Calculator—or Airbnb calculator, depending on your strategy–in this step to make sure you’re getting reliable numbers!
Step 8: Manage Your Property Like a Pro
After completing all of the above steps, you can move on to the last step of becoming a real estate investor which is to actually buy a rental property and manage it. Rental property management involves a number of tasks including finding and screening tenants, collecting rent, maintaining the rental, doing necessary repairs, and more. So, this is where you should put your time and energy as you don’t want the property to sit empty and collect dust instead of money.
While you can definitely manage an investment property yourself, some beginner property investors turn to professional property management companies. There’s nothing wrong with doing this, but you have to add management fees to your rental expenses which you need to cover. So, if you can afford to, look for a property manager to add to your real estate network.
The Bottom Line
And this is how to become a real estate investor. Many beginners spend too much time researching, and not enough time taking action. Don’t be one of them! Do your due diligence, but don’t procrastinate getting started in real estate investing. When you feel that you’re ready to grow, you can sell or refinance the property and repeat step #6. Buy another investment property and keep doing that until you build a real estate empire.
Remember: The sooner you buy your first investment property, the sooner you’ll reach financial freedom. So what are you waiting for? Start out your 7-day free trial with Mashvisor now to start looking for and analyzing the best investment properties for sale in your city and neighborhood of choice. Using advanced tools, you’ll find what you’re looking for in a matter of minutes!