In 2008 the housing market in America collapsed, making what was once a rock-solid industry suddenly risky business. Fortunately, the market bounced back quickly. In fact, on average sellers are now getting 98% of the listing price for real estate.
For people looking for another source of income or wanting to make a career change, becoming a real estate investor is an attractive option. Not only is it potentially lucrative, it’s exciting.
However, this isn’t an industry you just jump into. You need to do a little preparation before you get started. If you don’t, you could risk losing a lot of money.
If you’re thinking about getting started in real estate investing, keep reading. We’re going over seven useful tips.
1. Set Your Goals
When starting any new business venture, you must determine your overall goals. Ask yourself where you want to be in one year.
It’s important to be as specific as possible. Your goal shouldn’t be to “get rich.” In fact, if you just want to earn a passive income, a business like High Return Real Estate can help.
Start by determining how many properties you want to invest in during your first year. Depending on the market you choose, setting a goal like this will give you an idea of how much you’ll be making.
You should also determine if you plan on flipping properties or renting them out. Many people invest in real estate to the point where they can retire and live comfortably off the monthly income from rentals.
When starting out, keep your goals relatively small. Remember, you’ll be learning a lot during the first year, so don’t overextend yourself. You could end up making costly mistakes.
2. Educate Yourself
Once you understand what you want to get out of investing in real estate, you need to start educating yourself. Fortunately, we live in an age of information, meaning what you need to know is right at your fingertips.
Instead of paying for expensive real estate seminars, look for free online resources to help you get a handle on the ins and outs of real estate investing.
Search for online forums where you can ask questions and get feedback from experts in the industry. There are also countless podcasts and books out there that will quickly educate you on what you need to consider when getting started.
Make sure you’re learning about things like evaluating neighborhoods, vacant land, and budgeting procedures. This type of knowledge is imperative for starting out strong in the industry.
3. Consider Partnering with Someone
Forming a joint venture with another investor is always an option. Partnering with someone who has experience is also a great way to learn a lot during your first year.
Consider partnering with someone who can put up the initial finances on your first property. Then you’ll do all leg work like finding a great deal and managing the property. With this arrangement, you’d make a percentage of the monthly profits.
Of course, you wouldn’t make as much as you would if you were on your own. However, this is a great way to ease yourself into the real estate industry. The things you’ll learn by partnering with someone are invaluable for when you go solo.
4. Decide on a Market
The real estate industry offers many options. When getting started, the best approach is to focus on a specific market and become an expert before moving into other areas.
To help you decide on which market you’ll focus on, you need to think about what you’ll be doing with your property. Are you planning on flipping residential properties or do you want to become a landlord and lease homes or duplexes?
You may also want to get into the commercial real estate business. This is a whole different ballgame and will require knowledge of city zoning laws.
You also need to nail down where you want to invest. Try not to limit yourself to property close to where you live. Look at what surrounding cities offer as well.
5. Your Funding Options
Unless you have your own savings you plan to use to buy your first property, you’ll need to secure financing. It’s extremely important to do this before you look for real estate. Some investors make deals and then find themselves scrambling to find funding.
If you’re not having luck with a traditional lender, consider seeking a private one. These are individuals instead of banks who are willing to put up the money to help you get started. However, keep in mind that these lenders typically charge a higher interest rate.
Traditional leaders will only lend a certain amount for certain types of properties. This is another reason why it’s important to first nail down the market you plan on focusing on.
In this day and age, networking is a must for almost any industry. For real estate investors, it’s critical.
We mentioned educating yourself by engaging in online real estate forums. Those are also great platforms for making new connections.
You should also look to see if there’s a local Real Estate Investor Association in your area. Attending meetings will help you meet other investors and stay in the know with regard to what’s going on in your community.
You can also look for online real estate groups. Sites like Meetup are great for connecting with locals who have the same interests and goals.
7. Make Your First Offer
Once you’ve done a lot of homework and preparation, it’s time to throw yourself into it.
Making your first offer on real estate can be intimidating. In fact, many first-time investors end up overthinking and analyzing the deal. This hesitation could actually hurt you in the end.
It’s important to understand it’s okay to make a low offer. Getting turned down isn’t the end of the world.
Make sure you involve an inspection contingency in your offer. This gives you the option to back out if there ends up being issues with the property.
Becoming a Real Estate Investor Doesn’t Have to Be Hard
Remember, this is supposed to be fun. Plus, it’s a great way to earn some serious cash on the side.
The most important thing to keep in mind is that you need to be prepared before your first investment. Keep all these tips on becoming a real estate investor in mind when starting out.
For more articles on making smart business decisions, check out our blog.