Real estate investing for beginners is both an exciting and intimidating endeavor.Many people are attracted to the real estate investing market for the many rewards it promises them in the long and short terms. However, not every real estate investor joins the class of successful property investors. Why? Well, there are certain factors that determine the success of your investment, and it’s up to the real estate investor to make sure to follow them.
Keep reading as we discuss what a beginner real estate investor should do/not do in order to reserve a seat in the class of successful property investors!
Real Estate Investing for Beginners – Do Gain Knowledge
Beginner investors must support themselves with knowledge about all the different aspects of real estate investing before entering the market. No, you don’t need to have a college degree in real estate to become a real estate investor, but no property investor can reach success without having sufficient knowledge of the real estate business.
Thus, before buying your first investment property, beginner investors have to read books, guides, and blogs on buying, owning, managing, and selling an investment property. Educate yourself about the different types of investment properties, investing strategies, financing methods and how to acquire them, and understand the legal aspects associated with real estate investing.
One of the best ways to gain this knowledge is by speaking with someone who’s already in the investing market. Experienced property investors can provide you with the ins and outs of real estate investing for beginners and share some challenges they’ve faced. In this way you’ll know what to avoid and what to do if you are ever faced with the same situation.
Mashvisor’s Knowledge Center is a good place to start as it covers real estate investing from A to Z!
Real Estate Investing for Beginners – Don’t Assume You Can Learn Everything Quickly
Beginner investors are often surprised how much work being a landlord actually requires. Still, don’t be overwhelmed with the amount of information you’ll find on real estate investing for beginners. Take your time to search for reliable, updated information and don’t believe those books that claim a real estate investor can make money in a number of days.
In addition, don’t assume you can learn everything in a few days or from just reading. The real estate market is constantly changing, and successful property investors are still learning every day of their careers. Don’t be overwhelmed by this. Instead, be patient, focus on learning the basics, and remember that real estate investing for beginners will become a second-hand nature with experience.
Real Estate Investing for Beginners – Do Get Your Finances in Order
Financing is one of the things that intimidates beginner investors. This is why it’s very important that you check your finances before buying investment properties. Ensure that you have a good credit score, read all about the different options for financing a rental property, and find out the best places to acquire a loan. Conventional bank loans are the most common in real estate investing for beginners. Other options are hard money loans, owner financing, and real estate syndication.
Related: Where to Get the Best Real Estate Investment Loans
Moreover, property investors must have a clear idea of their income (cash flow) and track their expenses. This is important to estimate the return on your investment and ensure you won’t struggle financially any time soon or in the future.
Real Estate Investing for Beginners – Don’t Forget to Set a Budget
Beginner investors don’t want to miss out on investment opportunities due to lack of financing. Thus, before buying a rental property, sit down and think carefully about the rate of return you’re aiming to achieve and how you will reach it. One of the best real estate investing for beginners tip is to set a clear budget and try to stick to it. Moreover, don’t forget to plan a budget for any unexpected expenses that may pop up.
Real Estate Investing for Beginners – Do a Real Estate Market Analysis
Conducting a real estate market analysis is probably the most important tip to real estate investing for beginners. Most of the time, beginner investors fail because they’ve bought a rental property in a hurry and didn’t spend enough time doing basic due diligence.
A real estate market analysis helps a real estate investor find the best investment property and predict its profitability and value before actually buying it. Furthermore, a comparative market analysis allows a real estate investor to decide whether a rental property is a good investment by comparing it to a number of similar investment properties which were recently sold in the target area.
Related: Tips for an Accurate Real Estate Comparative Market Analysis
Real Estate Investing for Beginners – Don’t Forget Using an Investment Property Calculator
Sometimes, you might find a rental property and think it’s the best one out there, only to discover how wrong you were after making the purchase. To ensure you’re getting accurate results when performing a market analysis, beginner investors (and also experienced investors!) must use an investment property calculator.
Real estate investing for beginners is made easier with Mashvisor’s investment property calculator. This tool gives property investors the ability to search for and analyze thousands of investment properties across the US based on accurate numbers regarding cash flow, cap rate, and cash on cash return.
Click here to find the best rental property with Mashvisor’s investment property calculator.
Real Estate Investing for Beginners – Do Diversify Your Investment Portfolio
One of the advantages of investing in real estate is the ability to build a diversified investment portfolio. Why is a diversified portfolio a must? Simply because it means multiple sources of income and less associated risks.
Property investors can choose from different types of investment properties (single-family, multi-family, apartment buildings, etc.) in addition to different strategies (long-term such as buy-and-hold and REITs, or short-term such as fix-and-flip, Airbnb, and wholesaling). Inviting in more than one property type and following different strategies is a great way to have a diversified investment portfolio and reduce risks.
Real Estate Investing for Beginners – Don’t Rush into Growing Your Investment Portfolio
Although a diversified investment portfolio is a must, beginner investors need to realize that this is something to consider after they’ve gained enough experience in the investing market. Owning a rental property is one thing, owning multiple investment properties is a different story! Before you start growing and adding investment properties to your investment portfolio, you need to ensure that you are in a good financial state to do so. Moreover, you need to think about whether you’ll manage your investment properties on your own or hire a professional property management (which is not cheap!).
Real Estate Investing for Beginners – Do Focus on Management
Real estate investing for beginners doesn’t stop after buying your first rental property. One factor that determines the success of your investment is great property management! Many beginner investors fail simply because they couldn’t keep up with the demanding nature of real estate.
Beginner investors need to be aware that managing a rental property takes time, organization, social skills, and attention to details. Ensure that you have all of these requirements, or hire a professional property management to make things easier for you. We did mention, however, that this is not cheap, so think carefully about this.
Related: Professional Property Management: A Key to Success or a Waste of Money?
Real Estate Investing for Beginners – Don’t Neglect Your Tenants
Finding good tenants is important to succeed in real estate investing for beginners. Conduct a thorough tenant screening process to find the best tenants who will pay rent on time and not damage your investment property. During this process, do a background and credit checks, check references, and conduct an interview with potential tenants.
Most importantly, don’t break any landlord-tenant laws such as discrimination based on gender, race, nationality, or evict a tenant without a notice. Furthermore, keep a good relationship with your tenants. Simple things like listening to their comments and conducting repairs as soon as they inform you about them help in keeping a healthy landlord-tenant relationship. No real estate investor wants to face legal issues with a tenant who believes you’re not a fair landlord.
Real Estate Investing for Beginners – Conclusion
Many people enter the real estate investing market, but not many of them become successful property investors. Mentioned above is a list of “Do’s” for beginner investors to follow and “Don’ts” to avoid. These factors are what sets successful property investors from average ones.
Head over to Mashvisor’s Knowledge Center for more real estate investing for beginners’ guides and tips. Don’t forget to sign up for Mashvisor to receive our blogs as soon as they’re published to stay informed about and updated on everything real estate, and to get full access to the best investment property calculator in town!