Real estate is by far one of the most lucrative investment options out there. In fact, according to MSCI (Morgan Stanley Capital International; a mortgage investment research firm), the international market for real estate investing was a whopping $10.4 trillion in 2020. With figures like that, there’s plenty to go around for everybody in this market.
But despite its potential gains, real estate investing is still an intimidating venture — especially if you’re new to the scene. If you’re a first timer looking for some insight on how to get started, you’ve come to the right place! Because in this article, we will be sharing 10 tips for first time real estate investors.
This first step is crucial; it’ll be very hard to get started if you’re dealing with financial woes. Things such as being in debt as well as a dinged credit score are financial snags that will hinder your progress when it comes to real estate investing. Clean up these monetary messes and you’ll be in a much more healthy financial situation that will be more conducive to jumping into real estate investing.
You shouldn’t invest in ANYTHING that you don’t understand; that’s a guaranteed strategy to lose all your hard-earned money. For this reason, you’ll want to learn all you can about real estate, property management, mortgage brokerage companies, and anything else about the industry. Purchase books, take courses, attend conferences, watch videos, and read articles about commercial property sales, leasing & property management, etc. This kind of education will go a long way and serve you well on your real estate investing journey.
Start small but think big. You may have lofty aims and that’s great. However, being a newcomer; inexperience and ignorance are not exactly assets when it comes to the game of real estate investing. Take baby steps with smaller properties so you can learn the ropes, get some experience under your belt, and see how things work. Have some humility and realize that this is a long game that will require some time before you start winning.
Prior to jumping in devoutly to a property, it would be prudent of you to know and understand the kind of returns you want. Begin by determining your investing specifications and then commit to strictly investing in properties that are in alignment with those requirements. So be sure that you’re up to speed on all the important numbers and figures in regards to your net yield, cap rate, cash flow, etc.
Finding locations is easy, there are properties on the market all around you. With that being the case, it may be tempting to stick to locations close to you that you’re familiar with. However, be sure that you also consider options outside of your local area. There are plenty of amazing opportunities to be found in out of town locations that you might miss if you fail to broaden your horizons.
You need to come at this with the mindset of a business owner. Why? Because that’s what real estate investing is. And similar to a real business, you’ll want to have certain plans and arrangements administered. Things such as having a business plan, actionable systems and methods, as well as milestones and goals that you want to hit are all necessary for success.
This is probably the most valuable thing you can do for yourself as it pertains to real estate investing. This is such a complicated and convoluted endeavor; doing it on your own is sure to result in a lot of unnecessary mistakes that can be avoided with the assistance of an experienced guide. By finding a mentor to coach you through the process, you’ll learn quicker, adapt faster, and achieve success in a much more timely fashion.
“Your net worth is equal to your network.” I’m sure you’ve heard of that quote before — it’s become somewhat of a cliche, because it’s true. You are who you surround yourself with. This is why it’s so vitally important that you nurture your relationships with other like minded people. Besides a mentor, you’ll also want to establish connections with other real estate investors; young and old, novice and seasoned, it doesn’t matter. By forging relationships with others on the same path as you, it not only opens up more doors of opportunity, but it also bolsters motivation as the support and encouragement from your peers will keep you going on your down days.
Developing methods and systems is crucial for efficiency. You can create methods for screening tenants, managing properties, handling billing, and everything else you can think of. This way, you can rest easy knowing that the proper systems have been put in place to ensure a seamless flow in your real estate investing operations. If you can’t create the systems on your own, it would be beneficial to hire someone who can as these methods can save you a lot of time and money in the long run.
Remember that despite all the benefits that come from being a real estate investor; portfolio diversification, tax breaks and deductions, inflation hedge, etc, that the ultimate objective is cash flow. And this comes in the capacity of monthly revenue. If the property in question is not producing cash flow, you may want to think about reassessing whether you want to keep it or not.
Starting out in anything is intimidating, and real estate investing is certainly no different. Accept the fact that you will make mistakes and feel uncertain of yourself. That’s all part of the process. However, if you stay the course and follow the right strategy, eventually you will become a success.
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