November 23, 2020

beginning real estate investor

5 Steps to Succeed as a Beginning Real Estate Investor

So – you’ve decided to take the plunge as a beginning real estate investor. When you’re starting out, questions and uncertainty abound. What types of properties do you want to buy? Should you hire an agent? And what about setting up financing, finding good contractors, and learning the property management game?

Most successful real estate investors will tell you they learned the answers to these questions on the fly, and as a beginning real estate investor, you can too – your instincts and processes will sharpen over time so you can act quickly and avoid common traps and stumbling blocks. 

But you don’t develop that experience sitting on the sidelines! As soon as you make the down payment on that first investment property, you will quickly scale the learning curve. You’ll learn the finer points of wholesaling, fixing, flipping, renting, and managing a property to determine what suits you as an investor.

From the outside, real estate can seem like a sink-or-swim industry, but look around to build a good team and develop reliable processes, and you’ll stay above the tide.

Follow these 5 steps as a beginning real estate investor, and you wont be a real estate rookie for long.

1) Get Educated 

Real estate-specific education is your key to thriving in the industry or achieving indifferent results that cause you to second-guess your decision. Read the books, listen to the podcasts, join online forums, and follow the discussions.

As a beginning real estate investor do anything and everything you can to understand what’s involved in financing, buying, selling, renting, and managing rental properties. Don’t cut corners – even for a fast study, this could take 6 to 8 months. This is your foundation, and it will inform all of the other steps. 

You will want to develop a working understanding of basic terms seasoned investors and agents use to discuss real estate for long-term or short-term investment purposes. By networking, you become familiar with the cost of typical repairs – for labor, materials, and general supplies. 

These costs, especially for labor, can vary by location, gathering information on the ground, and talking to contractors and suppliers. This knowledge helps you quickly estimate a property’s after-repair value (ARV) to tell you if the property is likely to be a good investment for you.

If you plan to rent the property, you’ll want information about average rental rates in the area. Look for online forums and rent evaluation calculators to calculate the ARV and rental rates.

2) Join Local Real Estate Groups 

Local Real Estate Investing Associations (REIAs) are free or paid membership groups where investors discuss real estate from every angle. The ideal group will bring in real estate experts who may or may not be selling a course or mentorship. 

For you, a beginning real estate investor, the essential function is to serve as a network of like-minded individuals. You are looking to discuss potential deals and ideas, and find recommendations for good team members and who to avoid.

The right REIA is worth even a steep membership price; you’ll learn from observing every discussion. But even more, when you actively participate and talk directly to the deal makers. They can point out risks you might not have identified. They can steer you toward reliable contractors and trades-people, and preferred lenders who have proven themselves as problem-solvers.

 This information is gold for building your real estate investing team and setting up your business for long-term success. 

3) Build Your Team  

You want to develop a team of professionals who will take your calls, including a savvy attorney, a reliable title company, an investor-friendly real estate agent, and a receptive lender or private money source. You will also need to develop relationships with reputable contractors for general work plus specialty contractors for plumbing and electrical – all licensed and insured. 

And as you scale, a capable office assistant will provide essential support to grow your business – and maintain your sanity! 

When you first start investing in real estate, you may not yet have a nose for what makes a good deal. Talk with other investors and real estate agents to learn what to look for and how to approach different opportunities. Get acquainted with wholesalers or active fix-and-flip investors and ask them to watch out for properties that meet your criteria and call you first if they see a deal. 

Many real estate investors are also real estate agents. You may or may not choose to become an agent, but you need a good real estate agent on your team. You will be best served when you find an agent who’s not afraid to tell you whether or not you can sell it for a good price once it’s fixed up or one who’s good at discerning whether or not you are dealing with a motivated seller.

4) Choose Your Real Estate Niche  

Choosing the niche you to focus on depends on your investment goals as a beginning real estate investor. 

  • Do you plan to retire from the work-a-day world and become a full-time investor? You may want to become a landlord, wholesaler, or fix-and-flip operator. 
  • Do you plan to (eventually) live off of your rental income? Your focus will be to build and hold an extensive portfolio of rental properties.
  • Do you love the challenge of finding and transforming a property? Becoming a fix-and-flip investor may suit you well.
  • Do you want to participate in real estate deals but not become an owner of a record at any time? You may want to wholesale properties by working with sellers to secure properties with a contract and then sell to investors. This can be hard, quick work, and a good network is essential. 

When you decide to invest in real estate, you have many options. Don’t feel locked into one niche if it’s not working for you, but focus on just one as you start. You will find your strength over time, at which point you can go all in and maximize your efforts. 

The best advice successful investors are likely to offer? Don’t flit around from one shiny object to the next; if you jump around too much, you may never realize your goals.

5) Line Up Your Ducks and Make the Offer  

All the education and connections in the world are moot to your career as a real estate investor until you take action. You need to get in the game and start to make offers, even low-ball offers. 

Some sellers may get upset, some may tell you to take a hike, but it’s part of the process. You’re not looking for those sellers. You’re looking for a seller who needs help and is willing to take your offer because you solve their problem. 

Be as creative as you can with your financing. As a beginning, real estate investor, take heart in the knowledge that there’s always more than one way to finance real estate. Bank lenders can provide conventional financing or other lenders who have more flexible terms or find private money sources. 

Becoming an Investor 

As with any meaningful pursuit, what separates the real estate investor who eventually succeeds from one who doesn’t are mindset and action. As you take action and gain experience with each transaction, the rest of the picture will come together. 

If you are like many other rookie investors, you will make a few mistakes along the way. With a specific goal in mind and a clear understanding of why you want to be a real estate investor, you’ll have the motivation to push through and succeed.

 

This article was written by the Rentometer Content Team. The Rentometer Blog features fresh takes and insights on rental housing topics, services, and technology. If you liked this article, subscribe to Rentometer’s email newsletter to stay up-to-date on the latest trends in rental housing.