Running real estate appears to be a daunting task to many aspiring to invest in it. Some plan to save with a huge amount as a target. Even more challenging is the knowledge necessary to run the business effectively. Often than not, however, starting a career as a real estate investor is not hard.
Learn from Experienced Investors
Learn from others who have gone before you in the investment world. Their knowledge and experience will provide you with the insight necessary to get started.
Begin Putting Money Aside for Investment
Many individuals believe that investing in real estate requires hundreds of thousands or even millions of dollars. You don’t need that much. While it is true that getting started costs money, it may not be as much as you think.
For example, how much would you put down on an $80,000 investment property? Around $20,000, because 20% of $80,000 (an average down payment) equals $20,000. So, if you think you’ll never be able to $20,000, then try a lower property. A down payment on a $50,000 home is $10,000. Would you be able to save $10,000 in a year? What if you did that over two or three years?
Select a Real Estate Market And Investing Style
It’s time to choose a market (or many) and a style of investing to follow now that you’ve started saving money for a real estate investment.
The following are the five primary types of real estate investing:
- A sole proprietorship means you are the sole owner of the property.
- You own the house with others in a partnership.
- Syndication entails putting your money into a pool with other investors to buy a building or property. You’re probably a passive investor, meaning you don’t make any decisions.
- REITs (Real Estate Investment Trusts) are similar to stocks or ETFs in that they hold several properties and sell shares to investors.
- Crowdfunding entails investing in an internet platform that functions similarly to syndication.
Investors who chose the sole proprietorship or partnership option should be aware of the following:
While many investors specialize in a single property type and focus on it exclusively, others will unavoidably have a portfolio that includes a variety of property types.
For example, many new investors begin by investing in single-family rentals (SFRs) because it is the most straightforward method to learn the ropes. You may apply what you’ve learned about investing principles to bigger and more expensive deals once you’ve mastered the basics. Some will invest in tiny multi-family properties such as duplexes, triplexes, and quadplexes. Then some of those investors will move on to larger multi-family properties with 5 or more units, which will cross into the commercial sphere. After they understand what they’re investing in, many seasoned investors decide to start investing in funds. After you’ve decided on a style that works for you, you’ll need to identify a market that you believe has promise.
Deal Research and Analysis
You’ll want to start undertaking deal research in that market once you’ve identified a target market.
What exactly does “deal analysis” imply? It’s a fancy term that investors use to describe the process of crunching numbers. You’re looking for a few things when you crunch the numbers:
Does it have a positive cash flow? I.e., after all, expenses, including a mortgage, is there money left over at the end of each month from the rental income? (if you have one).
What are the costs, and is there a method to enhance or reduce them?
Is this a property you’d consider investing in and is it in an area with high rental demand?
Real estate is a people-oriented, relationship-driven industry. Being a successful investor on your own is practically difficult. Growing as a real estate investor requires networking and creating a team.
Referrals are the most effective technique to grow a team. You may not know anyone who can refer you if you’re just starting and have never met anyone who has done a real estate deal. Hence, you’ll have to be a little more resourceful. Fortunately, Google is always willing to provide a hand. Doing an online search for “the finest investor-friendly real estate agent” in your market is a terrific place to start.
You should phone a few different agents until you discover one you enjoy working with. Once you’ve discovered your dream agent, ask them for recommendations for lenders, property managers, and insurance agents/companies. They may also be able to recommend other members of a team. However, just because someone comes highly recommended by a member of your team doesn’t mean you shouldn’t conduct your research. It’s important to realize that vetting and drafting a quality team is still your responsibility. Recommendations are useful, but nothing beats a face-to-face interview.