How to Start Investing in Real Estate: Is Real Estate Investing for You?
Even though real estate is a very lucrative business, it does not mean that it’s right for you. Of course, deciding whether it’s your thing or not depends on your personal qualities as well as your willingness to commit. So, before you start, ask yourself the following questions:
- Why: Why do you want to invest in real estate in the first place?
- How: How do you get into real estate?
- What: What resources or knowledge do you have? If you do not have a degree, don’t worry, you do not need it.
- When: When do you plan on starting?
- Where: Where do you want to invest? Are you planning on local investing or out of state investing or even investing internationally?
Basically, these are the most simple questions to set you on the right track. Find out what your purpose is and whether you are ready to take that step. Only then can you move on to the next step.
How to Start Investing in Real Estate: Set Your Goals Straight
Now that you know real estate is for you, get started with your plan. Your plan should include the answers to the previous questions as well as other factors. Write down your budget, your investment strategy, the location, and what type of financing you are planning on applying for.
The reason we recommend writing down your goals in detail is to have them in a physical form. It is always easier to achieve goals when you can physically see them. Therefore, it makes it stick in your mind and it also helps you stick to the plan in the first place.
How to Start Investing in Real Estate: Check the Investment Property Financing Available
Once you have set your plan, think about the finances. Of course, buying an investment property requires financial resources. However, if you do not have cash, it is OK. In this case, it will be of great help to ask other real estate investors or even do a proper research on the internet. You will find that the best quality of real estate investing is the variety of investment property financing strategies. Here on Mashvisor, we have so many blogs that you could use as guides on financing an investment property, so here is a couple:
Moreover, to learn how to start investing in real estate with no money down, we suggest you read the following blogs as well:
How to Start Investing in Real Estate: Check Out the Investment Strategies Available
Investing in real estate provides you with a wide range of investment strategies to go with. If you wish to become a landlord and have the nerves to deal with tenants, then you can invest in rental property. You get to choose to invest either in traditional rentals (which we think is the optimal rental strategy in real estate) or Airbnb rentals. Moreover, if you do not wish to become a landlord, you can invest in fix-and flips or even wholesaling real estate. So, really, there is no limit to what you can invest your money in.
How to Start Investing in Real Estate: Observe the Market
Part of becoming a real estate investor is observing the market. Based on what strategy you choose to go with, check to see what the real estate market looks like for that specific investment strategy. For example, we said you could invest in Airbnb rentals. Therefore, check your local market and see if this type of real estate investment strategies is a good idea there. If not, you might want to pick another location.
How to Start Investing in Real Estate: Learn All About the Real Estate Market Analysis
The real estate market analysis is all about the location. When you buy an investment property, the first thing you have to do is to analyze the area. We mean this in terms of profitability. A profitable real estate property is always in a location with a good appreciation potential. Moreover, this type of analysis could determine whether you are investing your money wisely. A lot of times real estate investors buy investment properties and neglect the real estate market analysis. As a result, they end up paying more than what the property originally costs. Therefore, to prevent such mistakes, make sure to compare your property to other investment properties in that same location.
How to Start Investing in Real Estate: Learn All About the Investment Property Analysis
The investment property analysis is another valuation method used to find profitable investment properties. It mostly focuses on the numbers and figures associated with the property. So, you take all the costs that you spent on the investment property and calculate the return on investment. In other words, you calculate if the investment property will generate a good return on the amount you have invested.
In this process, however, there are a few metrics to pay attention to. First of all, you want to calculate the capitalization rate. Essentially, it is the return you will have on the overall amount you have paid regardless of the financing strategy. Second, you will have to calculate the cash on cash return. This means, that you also calculate the return but only on the amount of actual cash you have paid leaving any external financing resources out of the calculation. Finally, you should calculate the cash flow. The cash flow is basically the money you will be making for yourself. This means that you deduct any expenses from the rental income. The amount you are left with is your share of the profit. Needless to say, the more the better.
How to Start Investing in Real Estate: Location, Location, Location
The reason we told you about the real estate market analysis is to be able to pick the best places to invest in real estate. “Location, location, location” is the rule you will have to abide by if you’re wondering how to become a real estate investor! Location is like the holy grail of all real estate investments. Therefore, a profitable location with a great potential will take your real estate business to a whole different level.
How to Start Investing in Real Estate: Use the Real Estate Investment Tools
We can never answer the question “how to start investing in real estate” without mentioning the real estate investment tools. Every real estate investor must know about the real estate analytics tools. These tools are the ones that will make the difference in your business as they save you the time and effort of calculations. Not only that but they will also help you perform the most accurate analysis which will accelerate your business’s performance in no time.
One of the best tools we would recommend is the rental property calculator. With this tool, you can forget about spreadsheets as well as all the headaches associated with them. Every successful landlord has this tool as a part of their investments. It simply performs investment property analysis in addition to the real estate market analysis in the most accurate way. It operates based on recent and past real estate market trends as well as real estate comps. So, you can rest assured knowing that you are choosing the best properties to invest in.
How to Start Investing in Real Estate: Mashvisor
Sure enough, we recommend that you check out Mashvisor for many different reasons:
First, you can obtain all the education you wish for through the best real estate blogs.
Second, you can check out our products amongst which we have the rental property calculator.
Third, you will find a wide variety of investment property in our listing section.