How to become a real estate investor is a question that many people are asking now more than ever. However, most people find the idea of becoming real estate investors intimidating because of their lack of knowledge of the real estate business.
Thanks to the internet and the many readily available real estate investing resources, almost anyone can jump in and become a real estate investor nowadays. Nonetheless, the start of real estate investing business is not as simple as buying a rental property and hoping for passive income. It takes lots of planning and research to have a successful real estate investment business. If you don’t dedicate enough time, money, and energy to it, you won’t obtain the financial rewards and long-term financial security that everyone desires.
If you are interested in knowing how to become a real estate investor, keep reading!
How to Become a Real Estate Investor: Education Is Key
The very first step to becoming a real estate investor is to support yourself with knowledge about all the different aspects to start a real estate investing business. Although it is not necessarily required to have a college degree in real estate to become a real estate investor, no real estate investor can make it into the market and succeed without having sufficient knowledge of the real estate business.
So, before buying a first rental property, beginner investors need to make sure they’ve learned the ins and outs of the real estate business, such as understanding the different types of real estate properties, the process of real estate investing, the legal aspects associated with real estate investing, the financial aspects of real estate and how to acquire financing for your investments, etc. You can gain these through many available sources such as books, blogs, guides, and even mentors.
How to Become a Real Estate Investor: Create a Business Plan
Creating a business plan is a crucial step in every investment career. It is wise to set your goals, how you plan on reaching them, and most importantly, constantly keep track of your budget. Putting your energy into your property investment is vital for making money in this business and becoming a successful real estate investor. Your business plan doesn’t have to be conventional; there are many creative means to real estate investing.
How to Become a Real Estate Investor: Choose the Right Location
As you probably already know, the location is one of the most important factors for the growth of your real estate investing business. When buying your first rental property, choose a location strategically and don’t put your attention only on the price alone; invest in good neighborhoods with more potential tenants. Be sure to find an affordable property with opportunity for development to ensure high rental income, high tenant occupancy, appreciation, and much more.
How to Become a Real Estate Investor: Choose Investment Strategy and Property Type
There are two main real estate investment strategies: Airbnb (short-term) rentals and traditional (long-term) rentals. As a real estate investor, you have to figure out which real estate investment strategy fits with your vision, business plan, and long-term goals.
Which real estate investment strategy you go for also depends on the property type. For instance, there are single-family homes and multi-family homes. Different types of real estate properties attract different target groups and require a different strategy for success. Before buying your first rental property, make sure it also fits your budget and business plan.
As you can see, selecting the best property can be tricky. Beginner investors are advised to use an investment property calculator—a tool that computes cash on cash return and cap rate as well as potential rental income. It helps real estate investors in analyzing investment properties and easily compare them to one another to find the best one.
How to Become a Real Estate Investor: Perform Real Estate Market Analysis
Real estate market analysis is probably the most important step to any real estate investment. It allows you to determine the best properties to invest in and predict the profitability and value of each real estate property before you invest in it. Furthermore, the real estate market analysis allows you to pick between multiple similar properties based on information about each property to determine which one is most suitable for your investment.
Before asking how to become a real estate investor, beginner investors have to clearly understand the different metrics that are used in an investment property calculator to estimate finances related to your property investment, such as cash flow, cap rate, and cash on cash return.
How to Become a Real Estate Investor: Establish the Appropriate Price for Rent
Since making money is the main goal of every real estate investor, the price you charge for rent is an important factor to think carefully about, because it affects your outcome significantly. If you charge too much, you might not find a tenant. On the other hand, if you charge too little, it would be impossible to generate positive cash flow, accordingly, you could lose money on your rental property.
When setting up the rent, beginner investors should take into consideration the property type, the features of the property, the location, the average rent charge in the area, etc.
How to Become a Real Estate Investor: Select Good Tenants
Once you are on your way to becoming a real estate investor, finding good tenants is important to succeed in the real estate business. Ideal tenants are able and willing to pay rent in full and on time each month, keep the rental property in a good condition, and follow the policies of the lease (rental agreement).
It’s helpful for real estate investors to create criteria to use when selecting tenants. Moreover, it is worth the time to do a background check and a credit check, check references, and conduct an interview with potential renters to make sure they are not the type who will destroy your real estate property or not pay rent on time, which will result in generating negative cash flow, something which all real estate investors strive to avoid.
How to Become a Real Estate Investor: Use Mashvisor
Mashvisor is an online platform which allows both beginner and experienced real estate investors to carry out their real estate investments more efficiently. Mashvisor’s blogs section offers hundreds of blogs and guides that cover all aspects of the US real estate investment business, from city-specific guides, through beginner guides, to expert tips.
Additionally, Mashvisor offers a selection of tools used in the process of real estate investing, including:
- Rental Property Calculator: It is used to calculate your property’s cash flow, capitalization rate, and cash on cash return.
- Airbnb Calculator: This is a free tool that estimates the potential Airbnb rental income, Airbnb daily rate, and Airbnb occupancy rate of a specific property.
- Property Finder: It allows you to find actual real estate properties available across the US, on the city level and on the neighborhood level, allowing you to determine the perfect property for your investment.
- Property Comparison: It compares similar properties in the same area with respect to their rental income, cash on cash return, cap rate, and occupancy rate, giving you an insight into your real estate investment before even buying your first rental property.
- Mashmeter: It constitutes a graphics tool supported by data which gives real estate investors an understanding of the returns they can expect on their real estate investment and allows them to compare returns on traditional rental and Airbnb rentals.
How to become a real estate investor is a frequently asked question by many. Becoming a real estate investor is not a simple task, and the real estate business might not be as easy as it seems. Nevertheless, if you invest time and effort, it will lead to great financial benefits, and you might become very successful in the field. Make sure to do some research and be wise with your real estate investment decisions. For answers to other important real estate questions besides how to become a real estate investor, read on Mashvisor.