Real Estate Investing for Beginners

On first glance, real estate investment seems simple enough in regard to generating additional income. Buy some sort of property for a set amount of money, fix it up, and then sell it for more or rent it out for a renewable source of liquidity). In actuality, the process never ends up this simple. These days, a real estate investor can profit from a joint venture, property wholesales, and successful property management. However, the market remains ever competitive. New real estate investors tank far easier than they succeed nowadays. If only there were some sort of guide that addressed the basics of real estate investing for beginners.

With the present situation in real estate, we sought to address the issue of how to generate revenue with rental income (or other types of property transactions) without ending up on the short end of the investment ‘stick’. In order to fully grasp real estate investing 101, you might contemplate attending a university program. Or, you may feel tempted to ‘carry over’ your previous experience with alternative investments (such as stocks, CDs, or bonds) believing that the lessons learned here relate to the dynamic field of real estate. In varying degrees, none of the above really apply here. Some of you may report success with either option. All you need to do here is apply some business-specific (and industry-specific) strategies along with the ten basic tips included in this article. Read on to learn about what it takes to transform yourself from an average Jane/Joe into a powerhouse of property investment.

Real Estate Investment for Newbies

As with any money-related endeavor, you must have a business plan. Figure out how much money you aim to make and how much time you can dedicate to this specific goal. Remain realistic and practical about your strategy. This strategy influences your approach from here on out. Make sure you work with a trustworthy mortgage banker or mortgage broker. Check out recommendations from your state’s chapter of the National Association of Realtors. Or, ask for references from more experienced investors. Then, determine the best places to purchase property in your area. This means expanding your scope beyond the immediate vicinities of your own home. Ask fellow investors for tips and tricks, find out the location of local real estate investment clubs, or check out online forums that belong to real estate groups. Finally, read our list of expert tips. They will help you sail the seemingly murky waters of property investment to a highly dynamic, competitive field.

The Top 10 Best Tips for Real Estate Investing for Beginners

  1. Make sure your credit rating remains up to par.

We’ll put this bluntly: no bank will take a chance on you with a loan for property investment if your FICO credit score falls below 700. You must also have a low debt-to-income ratio. You may have to pay off some of that outstanding debt in order to improve your index. All three credit bureaus in the U.S. will provide you with one free score report per year. This is a good place to start improving your credit.

  1. Try a comprehensive approach.

We can’t give you a clear cut single area (or source) of property investment. The market varies with the passage of time. Furthermore, no clear cut source exists to become educated in all matters of real estate investment. Go out on the town and look for sellers with a deadline that is quickly approaching. Check out the local MLS and online real estate portals. Similarly, you could examine educational sources that provide a practical approach to investing. They will tell you what flipping, renting, buying, and selling are all about. Look for sources that are up-to-date. Steer clear of anything that smacks of a ‘get rich quick’ scheme. The old adage rings true here: if it’s too good to be true, it probably is.

  1. Real Estate Investing for BeginnersExperience matters

As mentioned before, working with the right real estate broker is absolutely pivotal to your success. The perfect broker possesses expertise and a proven track record. You must ensure that they’ve worked with foreclosures and private investors before. The housing bubble of 2007 and ensuing market collapse created a slew of so called experts that really have next to no experience save for a few quick courses in real estate investment. Make sure your Realtor about debt service. A proper Realtor must understand essential business concepts such as return on investment and net operating income.

  1. Don’t buy into the hype

Talk to just about any investor that works with futures, stocks, or bonds. More than likely, they will lecture you on understanding, minimizing, and working with (calculated) risks. Sadly, the situation often ends up completely different with real estate investors. Many factors sway investors into believing that investing into the property market is the safest bet. However, less than 10 years ago the very same market crashed with disastrous consequences. Keep this in mind whenever you contemplate disregarding (or downplaying) risks.

  1. Remember the power of networking

Investing in real estate is not a solo project. Strive to become part of an complex, evolving network. Key players in the real estate investment network include clients, partners, non-profits, mentors, and fellow investors. Following this advice, you’ll always maintain access to a pool of expertise and experience. This access might boost your career as an investor in unprecedented ways.

  1. Develop your own brand

You must develop and work on mastering your own niche of the real estate market. This niche may be a particular area or type of property. Or, the niche may involve very specific approaches of buying, renovating, and renting (or selling) a property. Whatever it is, hone your skills. Reputations are far reaching for property investors. And, you want that reputation to remain positive.

  1. Value thy accountant

No one can do everything perfectly all the time. You must surround yourself with the right people for the right job. So, make sure you develop a strong relationship with a skilled accountant. Taxes typically take up a large chunk of your yearly expenses. Moreover, lawmakers have created some complex taxation laws that remain beyond the grasp of a basic layman. Find an accountant you can trust and don’t worry too much about their expenses. In the long run, you stand to lose far more money by working with a non-professional.

  1. Be ethical

This can be easier said than done. The field of property investment is never governed by one written code of ethics. You may feel tempted to consider all of the things that you could get away with (and how this could improve your bottom line). As with most other fields of investment, real estate also works according to an unwritten system of referrals. In other words, you must treat your brokers, bankers, clients, and partners with respect. In fact, you should encourage them to ask for references. That’s the stepping stone towards building a solid reputation in the field.