Are you thinking of starting a real estate investing business? Then you’ve come to the right place. In this article we will show you the 5 steps to getting into real estate investments. With these 5 simple steps even beginner investors can learn how to make money in real estate with traditional and Airbnb rental properties.
Make sure to also check out our real estate video on this topic, available below.
Step #1: Sort Out Financing
One of the prerequisites for a successful and profitable real estate investing endeavor is choosing the optimal financing method. Beginner real estate investors usually have two main options to choose from when buying rental properties: 1) paying in cash or 2) taking a mortgage loan.
Which financing option an investor selects should depend on his/her savings and income. As the vast majority of new investors don’t have sufficient savings to buy an investment property fully in cash, they resort to applying for a mortgage loan.
Either way, you have to consider carefully exactly how much you can afford to spend on an income property without going bankrupt or ending up in a foreclosure. If you decide to take a loan, you should explore the terms and conditions offered by a few different banks and other financial institutions. The interest rate and other conditions can vary widely from one financier to another.
If you need to take a mortgage loan, it is important to get pre-approved in advance, even before you begin your investment property search. In this way, you will look like a responsible and serious property buyer, so property sellers and their real estate agents will give you priority compared to other potential leads. Moreover, you will be ready to move forward with buying a rental property as soon as you find a positive cash flow property with a cash on cash return and cap rate. This is a must in a seller’s market and highly recommended even in a buyer’s market.
Step #2: Find the Best Real Estate Market
The next step to starting a real estate investing business with a high rate of return is to locate one of the best places for buying rental property. One of the first things which beginners should learn is that location is a key factor when investing in real estate.
Importantly, there are many indicators which go into choosing the best places to invest in real estate. For example, you should go for a location which is within your budget and which is generally affordable. Buying cheap real estate is one of the easiest and most straightforward ways to push up the return on your investment property. Moreover, financing is easier and less risky when buying affordable rental properties.
Meanwhile, you should look for a housing market with a high rental demand for traditional rental properties or Airbnb rentals, depending on your preferred real estate investment strategy. Yet another factor to consider is the prevailing rental rates, whether monthly rates for long term rental properties or Airbnb daily rates for vacation home rentals.
Collecting all the real estate data that you need to conduct reliable real estate market analysis to choose a top location requires weeks or even months. You need to conduct both city and neighborhood analysis as property prices, rental income, and return on investment vary widely from one area to another.
If this is your first time to invest in real estate, all this data collection and analysis might look discouraging. Alternatively, you can sign up for Mashvisor’s real estate investment software platform to perform neighborhood analysis quickly and efficiently. With the help of the heatmap tool, you will locate the areas with the lowest listing prices and highest traditional or Airbnb rental income, cash on cash return, and Airbnb occupancy rate in any US city or town. With the rental property calculator, you will obtain all the real estate analytics you need to decide whether a neighborhood is a good place for real estate investing with your budget or not.
Related: Real Estate Heat Map: A Revolutionary Tool for Neighborhood Analysis
Step #3: Search for a Rental Property for Sale
When first learning how to get into real estate, the next step one should take is to conduct thorough investment property search. Traditionally, there were various resources which a real estate investor could use to look for rental properties for sale. These include but are not limited to “For Sale” signs, listings in local newspapers, hiring a real estate agent, talking to friends and relatives, and others.
However, real estate websites are becoming more and more important when it comes to finding the best investment property for sale with a positive cash flow and a high rate of return. The reason is simple. Online property search has been optimized with such websites. For example, on the Mashvisor real estate app you can look for MLS listings, foreclosures, and even off market properties based on your budget, financing method, expected traditional and Airbnb rental income, required cash on cash return and cap rate, preferred rental strategy, and other factors.
One of the real estate investment tools available on Mashvisor which is particularly helpful for those just getting into real estate investing is the Property Finder. With this tool, you can search for lucrative traditional and Airbnb rental properties in multiple housing markets based on budget, property type, number of bedrooms and bathrooms, and rental strategy. You will be provided with a list of all listings in the area which match your criteria, with the most profitable ones on top of the search results.
Related: Property Finder Tool – Finding Real Estate Investment Properties
Step #4: Analyze the Investment Potential of Rental Properties for Sale
The next step into buying an investment property for sale with a high return comprises of conducting rental property analysis. This type of real estate analysis is an absolute must when learning how to start investing in real estate.
Investment property analysis refers to estimating the startup costs associated with buying rental properties as well as the recurring monthly and annual expenses related to owning an income property. You should also forecast the rental income you can expect to make from your property investment. The difference between rental income and rental expenses is known in real estate investing as cash flow. You have to make sure that this number is above zero – i.e., that you are buying positive cash flow income properties – to make money from real estate even as a beginner. In the opposite case, you will be losing money. In addition, you should also calculate that return on investment you can expect in terms of both cash on cash return and cap rate.
That sounds like a lot of traditional and Airbnb data collection and analysis for someone who’s just starting investing in real estate, right?
To facilitate your investment property analysis, you can use Mashvisor’s investment property calculator. This real estate software tool will provide you with readily available estimates of all the numbers and figures mentioned above. Importantly, these estimates are highly reliable as they are based on the actual performance of real estate comps and traditional and Airbnb rental comps in the area.
Related: How to Find Reliable Traditional and Airbnb Rental Comps
Step #5: Hire a Real Estate Agent for Real Estate Investing
When first getting into real estate investing, buying a rental property on your own is tough, especially if you have no previous experience in the US housing market. That’s why you should work with a real estate agent. Agents are professionals who will help you find properties for sale including MLS listings and even off market properties, foreclosures, short sales, bank-owned homes, and others. Moreover, they will negotiate the best possible price on your behalf with the property seller or the seller’s agent. Additionally, they will close the best deal quickly, while coordinating the work of all other real estate professionals needed for buying an investment property.
If you want to find a top-performing agent in any US housing market, you can check out real estate agent profiles on the Mashvisor real estate investment app. You can choose from hundreds of agents in every single city or town based on their areas of focus, expertise, experiences, and property listings.
The answer to the question “Is real estate a good investment?” has always been, currently is, and will always be “YES!” The sooner you get into real estate investing, the sooner you will start making money from rental properties. By following the 5 steps outlined above, you are guaranteed to succeed. To start searching for and analyzing profitable traditional and Airbnb income properties in any US market, sign up for Mashvisor now.
