Investing in real estate is an excellent way to grow wealth, but the amount of information out there can make starting the process daunting. Here are some tips to keep in mind as you explore real estate investing for beginners.
Real Estate Investing for Beginners: Commit to the Journey
You should not start investing in a real estate on a whim. Do your research and go into it knowing that there will be ups and downs, gains and losses. You will make mistakes, but you will learn from them.
Success doesn’t come from a lack of failure, it comes from capitalizing on the failures to aid your growth as an individual and investor. Start by developing a written plan. You don’t have to stick to it 100 percent, because as you learn from experience, your strategies will shift. Write this plan as a road map you can use to guide you toward your goals, knowing you may need to take some detours along the way.
Find Your Niche
There are a multitude of niches and investing methods. You don’t have to know all of them. Focus on what works for you and develop your skills in those areas. It is better to be an expert in your select path than know a little about a plethora of options.
Again, do your homework. Study the market and the methods, and learn everything you can before writing the first check. There are many books on the market that can guide you as you begin. Spend some time reading the reviews of these books and choose the ones that reviewers time and again highly recommend.
This will help build your knowledge base and teach you the lingo. Knowing the terminology used in the business is vital for communicating with others and understanding what’s being communicated to you.
Be Numbers Savvy
Real estate is a numbers game. You need to have a grasp of basic math, and scrutinize every investment dollar for dollar. What looks like a good deal may be a money pit once you factor in repairs and maintenance. Begin your business with detailed bookkeeping and financial analysis. Excellent record keeping is critical to establishing a profitable business in any field, and real estate investing is a business. Treat it that way.
Make Connections
A critical step in real estate investing for beginners is making connections. As is the case in most businesses, sometimes who you know can make all the difference. Reach out to other local investors for networking opportunities. Find a mentor, if you can. Your best bet is to find a savvy team of experienced real estate professionals who can teach you the ropes and help you reduce your financials risks as you begin.
Types of real estate investments
There are a variety of ways to get into real estate investing for beginners. They include the following.
- Rental properties: This is your basic, buy a property, rent it out, and let its value appreciate while the mortgage is paid by your renters.
- Real estate trading or ‘flipping”: This involves buying a property with the intention of holding it for a short time, usually less than six months, then selling for a profit. These may include distress sales (foreclosures and short sales), and properties that need repair. A real estate flipper banks on purchasing an undervalued property that can be resold quickly at a profit.
- REITs: A real estate investment trust is created when a corporation uses investors’ money to buy and operate income properties. REITs are bought and sold on the major stock exchanges.
- Real estate investment groups: A company will buy or build apartments, condos, or commercial properties, then allow investors to buy them through the company, thus joining the group. The company manages the leases, repairs, etc, for a portion of the monthly rent from your tenant.
Keeping these tips in mind can get you started on the right foot when starting your career in real estate investing. Just remember to plan thoroughly and seek the advice of professionals in the real estate business – they can make the difference between finding a good deal or getting in over your head.