The real estate investing business is attracting a lot of beginners into entering the market. Thanks to the many perks attached to owning investment properties, it’s no wonder why so many are thinking of becoming property investors.
Having said that, starting anything new can be scary and overwhelming and, most of the time, beginner property investors are not even sure how to begin. Moreover, while real estate investing is a great way to make money and build wealth, not everyone is cut to make it as a successful real estate investor.
If you’re thinking of becoming a real estate investor, you must be filled with questions. Keep reading our guide as we answer some of the most common questions beginner property investors ask to help you figure out if real estate investing is the right career path for you.
What Are the Different Kinds of Real Estate Investing?
The first thing you need to decide to start a career in real estate is what type of investor you want to be. One of the best things about real estate investing is that there’s no “one-size-fits-all.” There are different kinds of real estate investing, each with its pros and cons, which you need to understand in order to determine which one fits with your investment and financial goals. Here is a basic breakdown of the main types of real estate investing:
- Rental Properties: This is the most common type among beginner property investors. With rental properties, you simply buy a house and rent it out to generate cash flow. There are many ways to make money with rental properties whether you’re going for long-term rentals (Traditional) or short-term rentals (Airbnb).
Related: Real Estate Investing: Traditional vs. Airbnb Investments
- Flipping houses: This type of real estate investing includes buying a house, fixing it up, and selling it to make a profit. However, finding deals, financing, finding contractors, and managing expenses are not easy and it takes quite a bit of money.
- Wholesaling: A wholesaler finds a real estate seller, gets the house under contract, and assigns the contract to an end-buyer. You don’t need to spend much money following this investment strategy, but it comes with some challenges.
- Commercial Real Estate: This kind of real estate investing involves leasing investment properties for businesses (not residents). Commercial real estate includes shopping centers, office buildings, retail shops, etc.
- Real Estate Investment Trusts: These are companies that pool money from investors to buy and manage large investment properties like hospitals and skyscrapers. The investors, in turn, receive a passive income in the form of dividends and they have minimal responsibilities.
Should I Be a Full-Time or Part-Time Real Estate Investor?
When you’re considering a career in real estate investing, you should also consider how much time you have to devote to your business. Obviously, the more time you can devote to your real estate investing business, the better your results. If you have a 9-5 job, this leaves you with a few hours a week for managing your investment, which will ultimately affect which investment strategy is the best for you.
For example, you might be interested in buying rental properties to generate passive income. However, this type of real estate investing requires you to put a ton of time and energy for marketing, managing, finding tenants, collecting monthly rent, etc. So, if you’re thinking of a career as a full-time real estate investor, this should be a good strategy to start a real estate investing business.
Looking to buy an investment property? Click here to start looking for and analyzing the best investment properties in your city and neighborhood of choice!
On the other hand, if you don’t have the time, it’s best to choose a different investment strategy and become a part-time real estate investor. For instance, part-time property investors have better chances of generating passive income from REITs because these don’t require them to worry about managing the investment, handling repairs, or attending to tenants.
How Much Money Do I Need to Invest in Real Estate?
Financing investment properties is a major concern for beginner property investors. When deciding if real estate investing is the right career path for you, another thing to consider is how much money you need to start. While there is no universal amount, it can take a lot of cash to buy investment properties and flip houses. So, ask yourself “how much can I afford to invest?”
Nonetheless, property investors have a number of options to start real estate investing with less money down by taking a loan. Conventional mortgage loans are the most common in the real estate investing business for beginner property investors. Other financing methods are hard money loans, private money loans, and owner financing. Work on understanding what is required of you to obtain these loans and how much you need to borrow.
Related: How to Start a Real Estate Investing Business with Little or No Initial Capital
How Do I Make the Best Decisions as a Real Estate Investor?
A successful career in the real estate investing business requires property investors to make smart investment decisions. With plenty of opportunities out there, how can you ensure that your investment property will generate the positive cash flow and return on investment you aim for? Moreover, you should already know the importance of location in real estate investing, so how can you identify the best locations for buying investment properties? Mashvisor can answer both questions.
To learn how Mashvisor can help you make profitable real estate investing decisions, schedule a demo with our team.
Our Investment Property Calculator allows beginner property investors to analyze rental properties by calculating the different values related to them, including the cap rate, cash on cash return, cash flow, and occupancy rate (for both traditional and Airbnb investment). These factors determine the return on investment and the profitability of your investment property.
In addition, Mashvisor offers the Investment Property Finder Tool that allows you to search for rental properties using different filters. Alternatively, you can use the heat map function which makes it easier to find rental properties much faster using visual cues. This further allows you to analyze different locations and neighborhoods and see which has more profitability for real estate investing.
To further understand how to use the Investment Property Finder Tool, read this!
How to Be a Successful Real Estate Investor
After you figure out the above and start your real estate investing business, you’ll want to know how to succeed. Obviously, surrounding yourself with knowledge about the business is the first step to success. Learn about the different aspects of real estate investing including financial and legal aspects. Real estate investing is not simply buying an investment property and waiting for it to generate passive income. Make sure you understand the different tasks and responsibilities property investors are required to perform.
Moreover, real estate investing is mostly learning by doing, so start taking action! Don’t be afraid to make a few mistakes – one mistake can be a great learning experience along the way. Another important tip to keep in mind is don’t try to do everything at once. Some want to be landlords, wholesalers, and flippers all at the same time – these people don’t succeed. Instead, choose one thing to focus on and you’ll have a better chance to become a successful real estate investor.
Related: 10 Habits for Becoming a Successful Real Estate Investor
To Sum Up
Real estate investing is one of the best ways to make money, but it’s not an easy career path. Many beginner property investors have problems getting started, and others get stuck reading about real estate investing instead of taking action. What makes successful property investors different from the rest is the time and energy they put into their investments.
Do you think a career as a real estate investor is right for you? Let us know in the comments! If your answer is yes, sign up with Mashvisor to get immediate access to the best real estate investing tools and start making faster and smarter real estate investment decisions.
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