Investing In Real Estate; A Beginners Guide
Step 1: Define Yourself as a Real Estate Investor
Investing in real estate, particularly rental properties can feel totally overwhelming and out of reach when you have not yet started, but the very first step could actually not be simpler….. DEFINE yourself as a real estate investor and decide on your goals, risk tolerance, and preferences. That is truly the biggest hurdle and one EVERYONE has to tackle first. The following are a few steps to help you on your way. (Pro-tip, don’t get hung up in analysis paralysis. These decisions can be fluid, allow yourself to decide now and know you may change it up in the future. The only way you can go wrong is if you do nothing out of fear of making a wrong choice.)
- Financial Goals: Specify your financial goals concerning real estate. Are you looking for passive income through rental returns, long-term appreciation, or a combination of both?
- Risk Tolerance: Assess your comfort level with the risks associated with real estate. Recognize that real estate investments can have market fluctuations and be prepared for potential challenges.
- Property Type Preferences: Consider the types of rental properties that align with your investment strategy. This might include single-family homes, multi-family units, commercial spaces, or vacation rentals.
- Location, Your Backyard: Determine the geographical areas that interest you. Research your local real estate markets (or where you'd like your market/you to be), rental demand, and economic indicators help you make informed decisions.
Step 2: Act Like a Real Estate Investor
Being a successful real estate investor is mostly confidence……just kidding, sort of. ;) It also involves adopting specific habits and strategies tailored to the rental property market.
- Educate Yourself on Real Estate: Dive into real estate education, focusing on topics such as property management, tenant relations, and local market dynamics. Understanding these aspects is crucial for effective property management.
- Financial Planning: Develop a budget that accounts for the costs associated with purchasing and managing rental properties. This includes property maintenance, insurance, property taxes, and potential vacancies.
- Tenant Screening Procedures: Implement thorough tenant screening procedures to ensure that you attract reliable tenants. This can involve background checks, income verification, and rental history assessments. And sometimes it involves good gut instincts, which you’ll develop as you go. A mentor once told us “Give Crap, Get Crap”, and we’ve found that to be fairly true. Offer something you’d live in yourself, if not now at one point in your life and you’ll find its much easier to attract quality tenants.
- Understand Rental Property Financing: Explore financing options specific to real estate investments. Understand mortgage rates, loan types, and how leverage can be strategically utilized in real estate. This is where your team comes in and the first person on your team should be a good Realtor who who understands real estate investing (not all agents are equal here) and can connect you with a quality lender who works with investors. Take a load off…..YOU do not need to know it all. As Andrew Carnegie once said, simply “surround yourself with people smarter than you”.
Step 3: Decide to Invest in Rental Properties
Making the decision to invest in rental properties involves both commitment and strategic planning.
- Start with a Single Property: If you're new to real estate investing, consider starting with a single family home. It could be your current home if your in a starter home. This allows you to learn the ropes without managing the complexities of a multi unit property.
- Choose the Right Location: Select a location with strong rental demand and growth potential. Consider factors such as job opportunities, amenities, and the overall appeal of the area to potential tenants.
- Craft a Real Estate Investment Plan: Develop a detailed plan outlining your real estate investment goals, preferred property types, financing strategy, and long-term vision for building a rental property portfolio. Again, this step is great, but do not let over-analysis here keep you from taking the first steps of actually acquiring a property. Your plan can evolve as you go.
- Stay Committed to Property Management: Recognize that successful real estate investing extends beyond the purchase. Commit to effective property management practices, including timely maintenance, responsive communication with tenants, and staying informed about local rental market trends.
By focusing on these steps tailored to real estate rental properties, you'll be better equipped to navigate the unique challenges and opportunities associated with this specific form of real estate investment.
We have been at the exiting and scary start of real estate investing and we’re rooting for YOU! The only way you can lose this game is if you never start. The rest is just wins or lessons.
~ Chris & Tiffanie Story