Getting a career started in real estate investing can be quite challenging. However, if you do it right, the rewards are totally worth it.
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Investing in real estate properties is a strategy that a lot of financially-savvy people do to expand their portfolios. It’s also a way of building a hedge against inflation. It mostly requires a huge amount of capital, but if done right, it can be the most satisfying thing you’ve ever done.
Capital is perhaps the major concern of many people about real estate investing. After all, no one wants to see their hard-earned money go to waste on a foolish investment. However, there are several smart ways to do it right, especially when it comes to finding the right investment property that will give you the optimum return on your investment.
In this case, real estate investing can be done more efficiently with the help of a real estate platform like Mashvisor.
In this article, we hope to shed some light on some legitimate concerns about real estate investing. We hope to provide you with enough information on how to start a career in real estate investing in the best possible way.
The right start will help you stay in the real estate investing game much longer.
Is Real Estate Investing Worth It?
Yes, it is. Real estate investing has changed the lives of many successful investors. It is great for an additional income source, regardless of investment strategy. You can get into house flipping or the BRRRR strategy and still make a decent profit from your initial investment.
Many investors who are after passive income start a rental property business. It allows them to receive additional income from monthly rental payments. Traditional and vacation rental owners can attest to this, especially those who are in hot rental markets.
Success in real estate investing can sometimes be attributed to being at the right place at the right time. However, it takes more than luck to succeed in real estate investing, especially if you plan to stay in the game for the long haul.
Real estate investing involves a lot of hard work. Many investors know that it usually is an uphill battle at different stages. Beginners sometimes overlook the challenges due to the excitement created by various earning opportunities.
Beginner investors who fail to prepare for contingencies typically experience some sort of trauma and discouragement. Most of them quit the game after one or two failed attempts.
As a beginner investor, you must understand that real estate investing is just like any other investment vehicle. It requires patience and the right knowledge and tools to succeed. Success is quite subjective in this industry, but ultimately, one will gauge their success if they realize a good return on investment and make a decent profit from their cash out.
Getting Started as a Beginner Real Estate Investor
Real estate is one of the most lucrative industries in the world. The right opportunities can give you attractive investment returns that can exceed your expectations. As a beginner in real estate investing, you need to learn how to identify such opportunities.
Now you’re probably thinking, “what is a good opportunity in real estate investing?” Certain factors are involved in determining whether an open door is worth considering or not. Primarily, your investment goals will determine whether an investment opportunity should be taken or passed on.
If you’re wondering how to start a career in real estate, here are some career opportunities to get into as a beginner:
- Real estate managing broker
- Commercial real estate agent
- Residential real estate agent
- Residential appraiser
- Commercial appraiser
- Property manager
- Leasing consultant
- Commercial leasing manager
- Foreclosure specialist
- Real estate attorney
- Corporate real estate manager
- Real estate developer
The Rewards and Risks of Real Estate Investing
All business and investment opportunities come with their own advantages and disadvantages. Real estate investing is no different. How a small business can benefit a business person is similar to how an investment property affects a real estate investor, beginner or not. On the other hand, the downsides are also very real.
So, before you get into real estate investing, you need to know some of its pros and cons so you can make an informed decision.
Real Estate Investing Rewards
Becoming an investor, however, can be the most profitable real estate career path. Regardless if you’re into residential (single family or multifamily houses) or commercial properties, real estate investing provides a wide range of benefits:
- Tax Advantages – Taxes are a major expense for businesses worldwide. One of the best ways to lower taxes is by investing in real estate. Warehouses, commercial buildings, apartments, single family homes, and multifamily homes all come with their own tax incentives.
- Cash Flow – Investing in rental property provides investors with a steady passive income, especially if the investment property is located in a strategic location.
- Hedge Against Inflation – Investing in income property is one of the best ways to hedge against inflation. Unlike other kinds of assets, real estate moves in the same direction as inflation. As prices of goods and services increase, so do home values and rents. It is one of the things that make real estate investing attractive to investors.
- Leverage Funds – When buying real estate, you can use leverage. For example, you can buy a $300,000 investment property with $60,000 without even using your own money. On the other hand, purchasing assets like stocks and bonds requires 100% of the investment upfront.
- Real Estate Appreciation – One of the main benefits of investing in real estate is the appreciation of assets over time. Your property’s value will be worth much more 20 years from now. Compared to other investment vehicles, real estate investing is almost always a guaranteed win because of this.
- Equity – Real estate investors build equity as they pay off their mortgages. They can then leverage the equity to purchase more rental units and increase their cash flow.
Real Estate Investing Risks
On the other hand, some associated risks also come with investing in real estate, especially if you’re a long-distance investor. So while it may be very rewarding, as a beginner investor, you should know some of the setbacks of real estate investing before you decide to get into it.
- Larger Capital – Investing in real estate properties, whether single family, multifamily, distressed, or turnkey properties, will cost you a lot of money upfront. On top of a seller’s asking price, you still need to shoulder associated fees and closing costs. You must also factor in home rehabilitation costs.
- Additional Mortgage Rates – Realistically speaking, not everybody has the financial means to do an all-cash transaction. Most real estate investors take out loans and have to pay mortgage rates over a specific period. Owning a real estate investment property usually means added monthly mortgage payments.
- Maintenance and Upkeep – When you decide to take opportunities to invest in real estate, you’re taking on the added responsibility of fixing and maintaining a property. It is especially evident when you decide to get into the rental property industry.
- Time-Consuming – How much time you spend on real estate investing depends on your investment approach. But regardless of strategy, investing in real estate will take up a lot of your time. Even rental properties need a certain level of commitment. They’re not completely passive as income properties you would expect for a “passive” income source.
So you see, there are ups and downs with real estate investment opportunities. It’s up to you to decide whether an investment property is worth the risk.
How to Start Your Career in Real Estate Investing: 5 Steps
With the right information and preparation, almost anyone can become a real estate investor. Here is how to start a career in real estate investing:
1. Get Some Education
Residential real estate investing can be very complicated for a beginner real estate investor. Get started in real estate investing by acquiring sufficient knowledge of how the real estate market works.
You will need to get familiar with several terms, such as real estate investment business plan, financial modeling, data analysis, the real estate syndication process, cap rate, cash on cash return, and occupancy rate.
The good news is that there are numerous ways of learning about real estate investing, both online and offline.
Real Estate Investing Courses
Several free and paid courses you can take online and in a physical class are widely available and easily accessible. You just need to know the right places to look. You can learn almost everything there is to know about real estate investing through the said courses.
Real estate investing courses vary in content and time frame. You can learn about the basics of real estate investing through courses about multifamily or turnkey investing or how to generate greater passive income from rental properties. Some courses teach you how to start a rental business or find the right investment property to help you meet your goal.
All you need to do is patiently look for the right material that aligns with your goals. You can sign up for a class within your city. Alternatively, you can register online if a specific course is being offered in an area far from your location and you need to travel a long distance.
As a beginner, you should ask yourself what is an excellent way to learn real estate investing without spending too much money. One of the most inexpensive ways you can learn how to invest in real estate properties correctly is through various YouTube tutorials and how-to videos.
Follow real estate channels like Mashvisor on YouTube for the best tips and tutorials in real estate investing.
Another easy way of learning how to get started in real estate investing is by listening to podcasts. Some people learn better by hearing concepts and ideas and are easily distracted by visual cues. If you are an auditory learner, we recommend that you check out podcasts from real estate websites and audio streaming services.
Real Estate Books
If you don’t like spending too much time on your digital devices, you can also learn about real estate investing by reading books on real estate. Personally, I prefer going over a book compared to browsing through my digital device.
One of the best things about using physical books to learn about real estate investing is that you can actually highlight important sections and write down your thoughts on the book’s pages.
One of the most practical things you can do as a beginner in real estate investing is to find someone who can guide you through the process. You need to surround yourself with the right people who know much more than you and with a track record of success in real estate investing.
Mentors can teach you how to spot the right multifamily properties for an Airbnb business. They can teach you how to use real estate investing tools to help make it easier for you.
Your chosen mentors can give you valuable advice based on their experiences in real estate investing. They can tell you what worked for them and give you warnings about things you should avoid. This way, you get the best advice without going through all the unnecessary hardships they went through.
To find a wise mentor, you need to go out of your comfort zone and meet them where they are, even traveling long distances. It is where building a network becomes a valuable firepower in your real estate investing arsenal.
2. Choose a Real Estate Investing Strategy
Your real estate investment strategy should fit your goals, needs, personality, skills, and budget.
For example, if you intend to flip properties, you will do well buying single family homes and not multifamily units. However, both property types work very well as rental properties. Basically, your real estate investing strategy will determine which property types will work best for you.
Here are some of the investment strategies to consider:
Buying Rental Property
You can choose to go for Airbnb rental property or traditional, long-term rental property. The best thing about buying rental properties is that you can start generating income immediately – as soon as you purchase a house and find tenants, provided the house is in good condition.
Such a strategy can be a long-term, reliable source of income. However, becoming a landlord means you will need to continually deal with repairs, complaints from tenants, and evictions, so you may want to consider hiring a property manager.
On the other hand, going the Airbnb route means you will have varying monthly income as vacation rentals depend highly on their occupancy rates.
Real Estate Wholesaling
Wholesaling involves getting a property for sale under contract from the owner, promoting the house to prospective buyers, and then flipping the contract to a buyer.
If you choose wholesale as your real estate investing strategy, you also need to accept that you cannot earn as much as the conventional house flipper. You function primarily as the middleman between the property owner and the prospective buyer. You make a small profit by selling the contract at a slightly higher price than the seller is asking for.
It is an easier investing approach, but its income-generating potential is relatively small compared to other strategies.
Fix and Flip
With fix and flip, you buy a distressed property, renovate it, and then sell it at a higher price to the final homeowner. Many investors were able to earn a very good profit and build a decent amount of wealth using the fix-and-flip strategy.
As already mentioned, you look for undervalued properties to improve and eventually resell at a profit. As an investor, you would want to recoup all the money you spent on purchasing the property and renovating it. You also plan to make a profit out of it as no investor goes into real estate investing to break even.
Buy and Hold
The idea behind the buy and hold strategy is purchasing an investment property and then selling it much later after its value has appreciated.
The goal of an investor who goes into real estate investing with buy and hold is to take advantage of appreciation to earn more on their investment with very little spending involved. They don’t immediately fix the property since they are in no hurry to make a sale. Instead, they just let it sit until it gets to the point where its value has significantly increased in the market.
Alternative Real Estate Investing
Investing in other real estate investment forms is another approach you can consider as a beginner investor. (REITs) is the most passive real estate investment strategy. It is quite similar to investing in shares or stocks.
You may also explore other options, such as real estate crowdfunding, hard-money loans, impact investing, real estate partnerships, and raw land investing, among others.
Which Real Estate Investing Strategy Is the Best?
Now, as far as which strategy is the best one, it will ultimately depend on your goals and preferences. Real estate investors have different philosophies and beliefs about what they’re doing. From setting goals to drawing plans to implementing them, each investor has their own rules and guidelines.
As a beginner, you should at least have an idea of what you want for yourself. Start with a vision and take it from there. Where do you see yourself a year from now? Five years? Ten?
Your vision will help you set long-term and short-term goals. These goals will serve as your real estate investing journey checkpoints to see whether you’re on track or need to try another route.
As long as you have a clear goal in mind, it is a lot easier to map out your real estate investing journey. Depending on your goal, you can then choose which strategy works best for you. Regardless of whether you plan to flip houses, own rental properties, do wholesale, or try out alternative investments, the important thing is you carefully plan your steps.
Real estate investing becomes a lot easier and more efficient with the right tools. A real estate website like Mashvisor comes in very handy at this point. Mashvisor offers its users access to a massive and regularly-updated database of almost every 2022 US housing market.
Access to such types of key information and data will allow you to make accurate and realistic ROI projections and empower you to make better decisions.
3. Select a Target Real Estate Market
Location is a very important element for the success of any real estate investor. It is why you should take a lot of time researching different real estate markets before making a decision.
You can evaluate locations using different criteria, such as population growth, jobs and economics, price to rent ratio, walkability, safety and crime rates, public transportation, taxes, and local laws.
Real estate investment tools such as Mashvisor’s Real Estate Heatmap can help you analyze different locations in the US housing market within minutes. The heatmap lets you analyze neighborhoods using metrics like listing price, traditional and Airbnb rental income, traditional and Airbnb cash on cash return, and Airbnb occupancy rate.
Just enter a location in the homepage’s search field. It will take you to a map that also functions as a real estate heatmap.
Once you turn on the heatmap features and select one of its filters, it will show you how a neighborhood performs based on the selected filter. Red areas indicate properties with lower rates, while green areas are the opposite. You can simply select the Traditional or Airbnb Cash on Cash Return filter to see which neighborhoods offer high, decent, and low rates.
The map will also show you listed properties represented by pins. Hover over a pin to see a summary, or click on it to get a more detailed view of the property.
4. Get Investment Property Financing
When it comes to financing your first real estate investment, there are numerous options to choose from. These include:
- Veterans Administration (VA) loans
- Federal Housing Administration (FHA) loans
- Portfolio loans
- Conforming loans
- Private lenders
- Hard money loans
- Seller financing
Each one has its own pros, cons, and requirements. For example, the success of your conventional mortgage application will depend on your credit score. If you have a poor credit score, your application is likely to be rejected. Be sure to review all your options.
One of the best things about financing a property purchase is that you don’t have the pressure of coming up with the full amount needed to buy a house. Financing a home only requires that you make a down payment between 15% and 20%. Coming up with a $40,000 down payment for a $200,000 property is a lot easier and far less stressful than buying in cash.
The tradeoff is the monthly mortgage payments. It is why you should carefully study your options before settling for a loan type.
When computing an investment property’s profitability, investors who take out loans typically use cash on cash return as their main metric. A cap rate assumes you are buying a property in an all-cash transaction.
Cash on cash return, on the other hand, takes the property’s net operating income and divides it by the total amount of cash spent on the investment. The CoC return metric gives you a more accurate dollar-for-dollar picture of your investment.
Mashvisor’s heatmap, in particular, gives you an overview of a location’s profitability, including its cash on cash return.
5. Have a Real Estate Marketing Strategy
Once you’ve acquired some investment properties, you need to have an effective real estate marketing strategy in order to attract renters or buyers.
The first step is to get your property listed on real estate sites such as MLS or Mashvisor if you plan on selling it. For renting, look into some of the popular rental listing sites. You can use yard signs, social media ads, newspaper or magazine ads, direct mail, and referral marketing to get the word out.
Working with a local real estate agent can also be a very effective strategy for finding buyers or tenants. Connecting with people and building relationships is also a great way of expanding your reach. At the end of the day, your reach will only go as far as the network you’ve built, so keep expanding your network.
An effective marketing strategy will allow you to spread the word about your property and generate conversions.
With all the details involved, investing in real estate can appear very intimidating for beginners. However, anyone can learn how to start a career in real estate investing.
The best way to get into real estate investing is by starting small. You need to do your homework about the specific market you’re considering.
Real estate investing should never be left to chance. You must be willing to get your hands dirty and do the hard work. Performing extensive due diligence is the norm you should embrace if you want to start a career and be successful in real estate investing.
After doing your research, start by purchasing one investment property. The best way to do so is to use a website like Mashvisor to find the most profitable investment properties that meet your needs.
Investing is made easier, faster, and more efficient with the help of Mashvisor’s tools, particularly with its Property Search tool, real estate heatmap, and investment property calculator.
As you begin generating some income and building equity with the right properties, you can invest in more homes. In no time, you will grow your portfolio and boost your income significantly.
To get access to our real estate investment tools, click here to sign up for a 7-day free trial of Mashvisor today, followed by 15% off for life.