Real estate investing is generally considered one of the most effective and reliable ways to generate income. Apart from being a great way to diversify your portfolio, real estate investing can offer several other benefits including cash flow, tax advantages, leverage, and appreciation.
But why doesn’t everyone who gets into real estate investing succeed? Of course, there are numerous reasons for this. However, much of it boils down to a lack of relevant information. While it’s certainly a smart way to invest, for beginner real estate investors, there can be a steep learning curve.
If becoming a successful real estate investor is on your bucket list in 2021, you should begin by learning the basics of real estate investing for beginners. In this article, we’ll cover exactly that. So keep reading.
Before You Invest
To be a successful real estate investor, there are some things you need to do even before you begin looking for investment properties for sale. Most of the time, people who rush into buying an investment property before doing these things end up making costly mistakes that sabotage their real estate career.
To ensure that you start off on the right foot, here are the real estate 101 tips you should be aware of before buying real estate:
1. Educate Yourself
If you are wondering how to get started in real estate, real estate education is the key to doing it right. Give yourself a reasonable amount of time, perhaps 3 to 6 months, to learn the basics of real estate investing for beginners. During this time, soak in all the real estate information you can.
There are many sources of information you could consider including blogs, real estate books, magazines, podcasts, seminars, and YouTube videos. Better still, consider having a mentor. It’s probably the fastest and best way to expand your knowledge and avoid the common mistakes made by beginner real estate investors.
Once you have educated yourself on the basics, commit yourself to take action. Don’t just keep learning endlessly without taking any concrete action.
Related: How Much and What Real Estate Education Do You Need to Become a Real Estate Investor?
2. Have a Plan
After you have learned the basics of how to invest in real estate, you need to come up with a real estate investment plan. As a beginner real estate investor, if you fail to plan, you are planning to fail. Having a plan is the best way to ensure you keep on track and are prepared for unexpected situations.
Like any other business, you should establish your investment goals (long-term and short-term) and assess different real estate investment strategies to find one that would best help you achieve your goals. While there are many ways to invest in real estate, not all would work for you. Weigh the pros and cons of each real estate investment strategy before making a decision.
You will also need a financial plan before you get started. How much money do you need and how can you get it? While there are many ways of financing real estate investments, not all will yield the same rate of return. Try to find one that fits your situation and investment goals.
Related: Developing a Real Estate Investing Business Plan for Beginner Investors
3. Assemble a Team
You may not realize it, but real estate investing for beginners can be very challenging. There are so many steps that are crucial to every transaction. The most successful investors understand that it’s impossible to do everything on your own. That’s why they always have a team of real estate professionals to help them with the different aspects of their real estate business.
Even with no experience, you can still maximize your return on investment potential by having a competent team around you. Your real estate team may include a real estate agent, home inspector, accountants, real estate attorney, property manager, etc. You don’t need to have all of them in your team as you get started. However, as your portfolio grows, you may need to bring on board more real estate professionals.
Outsourcing some tasks will not only save you on time but also make up for your lack of experience. Just remember to do your due diligence to make sure that you are working with competent and trustworthy people.
How to Find a Good Real Estate Investment in 2021
If you have learned about the basics of real estate investing, created your real estate investment plan, and have a basic real estate team, you are now ready to make your first investment.
1. Find a Profitable Housing Market
To find an investment property with a good rate of return in 2021, you first need to select the right real estate market. Since location has a significant impact on the return on investment of an income property, it’s crucial that you perform a thorough real estate market analysis even before you begin your property search.
Related: 10 Best Places to Invest in Real Estate in 2021
Finding a profitable area to invest in doesn’t have to be hard and time-consuming. If you are buying an investment property in the US, you can use Mashvisor’s real estate heatmap to quickly and easily identify high-performing neighborhoods in any city. The tool performs a neighborhood analysis based on listing price, rental income, cash on cash return, and Airbnb occupancy rate.
2. Focus on Cash Flow Properties
A positive cash flow property is generally the best real estate investment for beginners looking to build their real estate portfolio fast. It will give you access to a monthly income stream, increase your serviceability, and lower your real estate investing risk.
You can use Mashvisor’s Investment Property Calculator to analyze investment properties for sale in the US housing market based on cash flow, occupancy rate, cash on cash return, cap rate, and more!
Related: How to Find Positive Cash Flow Properties
The Bottom Line
If you have been looking for an accessible and dependable way to generate income and build wealth in 2021, real estate investing could be the way to go. However, it’s important that you first learn the basics of real estate investing for beginners before you get started. While this article is not exhaustive, it should give you the knowledge and confidence you need to take the jump as soon as possible.