Consider the following Google search statistics:
Real estate investing – 1.7 billion searches
How to start a real estate business – 3 billion searches
How to start a real estate rental business – 441 million searches
How to start a real estate investment business – 859 million searches
How to make money in real estate – 1.5 billion searches
How to get started in real estate – 921 million searches
This is a clear indication that many people have an interest in buying rental property.
Real estate data shows that in recent months the number of homes sold in the US housing market has increased despite the pandemic. According to Statista, 5.64 million existing homes were sold in 2020. The same report forecasts that 6.49 million existing homes will be sold in 2021. Due to the demand for real estate properties, home prices have also been skyrocketing. Mashvisor’s nationwide real estate market analysis reveals that by October 2020 the average national home price had increased by 7.2% compared to the pre-Covid level. Similarly, the Zillow Home Value Index shows that home values went up by 9.9% over the past year and are expected to go up by another 11.4% in the next year.
In sum, these numbers mean that 2021 is a good time to buy your first rental property, before prices have gone up any further. In addition to making money in the short term from rental income, you will be able to make money in the long term as well from real estate appreciation.
Before we look at how to start a real estate business this year, let us consider some of the benefits of real estate investing.
Advantages of investing in real estate
- Monthly passive income – Investing in rental property allows you to enjoy a passive cash flow from the rent collected, provided that you hire a professional property management company.
- Building equity – As you pay off your mortgage, you build equity in your home. You can leverage this equity to buy more homes, thus boosting your cash flow.
- Appreciation – Generally, the value of real estate increases over time. This means that you can charge higher rents and even make a good profit whenever you decide to sell.
- Portfolio diversification – If you are already investing in gold, bonds, stock, and other security, traditional and Airbnb rental properties allows you to diversify your real estate investment portfolio and mitigate risk.
- Tax benefits – Real estate investors are eligible for many tax breaks and deductions. This allows them to save money when filing during tax season.
- Hedge against inflation – Unlike other kinds of investments, real estate provides protection against inflation. Th increase in rents and home prices usually exceeds the rate of inflation.
How to start a real estate investment business in 2021
Here are some real estate tips and tricks to consider if you’re thinking of becoming an investor this year:
1. Educate yourself
Real estate is a very complex subject. You should therefore take time to learn as much as you can before venturing into the business. Get familiar with the housing market, investment strategies, financing options, housing and rental laws, and risks associated with real estate investing. The good news is that there are many YouTube channels, blogs, books, real estate podcasts, and websites where you can get all this information for free.
2. Choose your real estate investment strategy
Here are some of the common real estate investment strategies you can choose from:
- Fix and flip – As the name suggests, this strategy involves buying distressed homes below market value, making renovations, and then selling them for a profit. This strategy is suitable for investors who want to make a lot of cash in the short term but who are also ready for some intense work.
- Wholesaling – Wondering how to start a real estate business with no money? Consider real estate wholesaling. With this strategy, you find a home for sale, place it under contract, and then sell it to a final buyer for a profit. This means that you don’t have to actually buy and own property.
- Rental property investing – This is one of the most popular real estate investment strategies. Buying a condo, a single family home, an apartment, or a multi family home and renting it out can be very profitable. You can choose between the traditional and the Airbnb rental strategy.
- Buy and hold – With this real estate strategy, you buy and hold an investment property for a long time. The idea is to sell the property when it has appreciated in value. Of course, you can rent it out meanwhile to make money in the short term as well.
3. Organize your finances
Besides wholesaling, all other investment strategies will require a significant amount of capital. Therefore, before you start looking for an investment property, you should make sure that you have a source of funding. Real estate investment loans you could consider include conventional mortgage loans, bridge loans, FHA loans, private money lenders, hard money lenders, home equity loans, and real estate partnerships. To qualify for some of these loans, you will need to have a good credit score, a low debt to income ratio, and sufficient cash reserves.
4. Conduct a real estate market analysis
Also referred to as a neighborhood analysis, a real estate market analysis is an assessment of the investment potential of a specific neighborhood. Start by looking at demographic factors like population size, age, population growth, employment levels, average income, and latent demand. Next, conduct a neighborhood real estate analysis by looking at things like proximity to amenities, access to public transportation, walkability, and undesirable features like garbage dumps.
Finally, you can check the investment performance of an area using the Mashvisor real estate heatmap. With this tool, you can analyze different neighborhoods using four main filters: listing price, rental income, Airbnb occupancy rate, and cash on cash return. With this must-have of the best real estate investment tools, you can select the most profitable area for investing within your budget.
5. Identify suitable properties
After identifying a potentially profitable area, the next step in how to start a real estate business is to find suitable properties. You can do this by visiting real estate websites, checking newspaper ads, direct mail marketing, or driving for dollars. An easier and more efficient way to find affordable homes for sale is by visiting the Mashvisor Property Marketplace. On this platform, you will find off market properties like foreclosed homes, short sales, bank owned homes, and even tenant-occupied rentals. Emails and phone numbers of current home owners are readily provided.
To start searching for the best real estate investment deals in your market of choice, sign up for a 7-day free trial of Mashvisor followed by a 15% discount for life.
6. Conduct investment property analysis
Rental property analysis will show you the viability of investing in a specific property based on the performance of actual rental comps in the area. For this, you will need Mashvisor’s rental property calculator. Within seconds, this tool will help you estimate the expenses, rental income, and profit you can expect from a specific income property. The main metrics generated include cash flow, cap rate, and cash on cash return.
7. Negotiate and close
The ability to negotiate effectively is crucial for success in real estate nvesting. As a beginner, it would be advisable to work with an experienced real estate agent or attorney. They will look out for your best interests and ensure that you get good value for your money. In addition, these experts will help you with the paperwork during closing.
8. Manage your property
Rental property management involves responsibilities like finding and screening tenants, maintaining the property, collecting rent, handling complaints, and making repairs. If you don’t have the time or the experience, consider hiring a professional property management company.
If you’d like to continue learning about how to start investing in real estate properties, check out our video below:
Clearly, real estate is not one of the easy businesses to start. It requires a lot of research and hard work. With the right real estate investment software, however, you can easily find and analyze the best income properties in the market. Finally, when thinking of how to start a real estate business, seek real estate advice from industry experts and experienced investors.