7 Real Estate Investing Tips to Help New Investors Get StartedNov 21, 2023
Real estate investing is a long-term investment strategy that can pay extraordinary dividends…if it’s executed in the proper way. Real estate investing requires more planning than even investments in the stock or mutual funds markets.
Research is your greatest tool and dedication is your greatest personality trait when investing in real estate. Additionally, you need a winning mindset that emboldens you to take chances and invest in properties with long-term capital appreciation potential.
If you’re just beginning your journey into the world of real estate investing, there are seven trade secrets you should know. Here’s an overview of each of those steps and how to apply them as you build the foundation of your real estate empire.
Tip #1: Research capital costs
This probably goes without saying, but investing in real estate is not for the frugal. Property acquisition costs require upfront commitments that cost hundreds of thousands, if not millions of dollars in down payments.
But it’s not just the down payment and upfront costs that you need to consider. There are operating expenses, maintenance costs, property taxes, upgrades, annual upkeep, legal costs, and other expenditures.
This doesn’t even account for the cost to finance your purchases. Many investors take out loans to complete the initial purchase, which carry interest rates on any accrued balances — rates that have dramatically spiked in the last calendar year.
Also, instead of direct loans, you can also pool your capital into a real estate investment trust. REITs are modelled after mutual funds, allowing you to secure capital from other investors to secure expensive properties. While REITs are great channels to acquire capital, you’re required to pay dividends to your fellow investors. As a result, your profit margins are less than they would be if you were to invest solely on your own.
Everything has a cost, and the best way to achieve success is to fully comprehend the cost of your investment venture. Do your research and map out your anticipated costs before you dive into your investment plans.
Tip #2: Select the right property type
After researching and budgeting your investment costs, the next step in your journey is to decide what property types support your investment goals. Keep in mind that you don’t have to stick with one exclusive property type. Diversification is an investment strategy that financial planners teach people all the time, and the same philosophy can apply to real estate investing.
There are two principal property types — residential and commercial. Within those broad categories are further segments that you should consider as you map out your investment growth plans.
In residential real estate, you can invest in single detached homes, semi-detached properties, duplexes, triplexes, and other consolidated properties. Additionally, you can venture into multifamily property investments, which we highly advocate for at WealthGenius.
Multifamily properties equate to more stable income flowing into your bank account each month. Also, one bad tenant doesn’t affect your financial situation nearly as much as the same situation with a single detached property. Multifamily investments may require higher upfront costs, but they pay more lucrative and stable dividends over the long term.
Tip #3: Inspect the neighbourhood
An old adage that any businessperson will tell you is this: the most important factor to a successful venture is location, location, location.
You must get a feel for the community to which you’re investing your time, money, and energy. Simply relying on the price of listed properties is not enough to make a well-informed investment decision. Conduct your own due diligence on a neighbourhood and answer questions like:
- What is the average market value of neighbourhood properties?
- How does demographic census data inform what you can earn in returns?
- Are there public transit lines available for tenants without cars?
- Does the community have convenient grocery stores, convenience stores, etc.?
- Is the neighbourhood deemed a safe community for families?
The more you can learn about a community, the better your investment decisions. Don’t be lured by the promise of an investment opportunity at a below-average price. Listed properties of that calibre are likely that low for a reason, and the community is the likely x-factor. Inspect the neighbourhood and make a well-informed investment decision.
Tip #4: Protect your own interests
Remember how we touched on legal costs as one of the financial considerations to begin your investment journey? Here’s where the legal side of things comes into play.
Consider establishing, or joining an already established limited liability company (LLC) to complete your purchases. LLCs reduce risk because, under the bounds of the law, the company owns the properties. If something were to happen to one of your investments, the LLC is responsible, and your personal assets are protected from any legal consequences.
Obviously, you don’t want any incidents to occur at your properties. But accidents can happen, and it’s better to be prepared for worst-case scenarios than to be caught off-guard. Protect your own interests as you build your real estate portfolio. Establish LLCs and other legally binding protective measures to secure your financial standing.
Tip #5: Create an annual operating budget
Gaining a realistic perspective on the costs to venture into real estate investing is one of the financial matters to consider. Another is in regards to your budget for managing properties.
Once you’ve selected your ideal property type, and the locations you want to invest in, it’s time to table an operating budget. Set reasonable terms for yourself in regards to things like rent, condo fees (for multifamily buildings), annual expenses, and an emergency fund.
Also, work out a budget that will help you grow your real estate business.
- Will you hire a property manager to handle day to day operations at your properties?
- If you have multiple properties, will you use the same property management firm?
- Can you afford property management at all your properties?
- How much tenant turnover can you afford before it affects your bottom line?
Naturally, as your real estate portfolio grows, the costs to run your business will also increase. Make sure you set realistic budgets to help sustain the growth of your portfolio.
Tip #6: Buy property positioned for growth
Of all the tips on this list, this is probably the most straightforward one for any new investor. Your goal as an investor is to make money on the properties you choose to invest in. Therefore, ensure the properties you do acquire are positioned for growth and high capital returns.
How do you do this? All the preceding steps, including budgeting, selecting property types, and inspecting the neighbourhood will all help you make investment decisions that are positioned for scalable growth.
The basic fundamentals of successful real estate investing: buy low, sell high, and use your earnings to build generational wealth. Follow this formula, and you’ll be positioned for success.
Tip #7: Hire a team to help build your empire
Another helpful saying to keep in mind is that, “it takes a village.” Nothing exists in a vacuum, and no one can effectively build a business entirely on their own.
That’s why it’s important to hire the right people to help scale the growth of your investments. Here are some of the most important people to add to your team:
- Property managers
- An attorney
- A CPA
- Real estate agents
- A property inspector
- Trusted handyman
- Credible plumbers
- Capable electricians
Each member of the team will specialize in different areas of property management. The sum of the parts amounts to creating conditions that will grow the value of your investments. You may be able to get things done faster alone, but you’ll undoubtedly go further together.
Join credible real estate communities to grow your plans
Want even more tips to grow your real estate investment business? Why not join the fastest growing real estate investment community. The community assists investors by helping them make wise investment decisions and generate steady streams of passive income.
Learn how to create the pillars of generational wealth. Access educational resources that open your mind, guide your decision-making, and help you become a successful investor!
Keep in Touch
Subscribe to our newsletter to receive real estate investing education, investing news, tips and information on upcoming events.
We won't send spam. Unsubscribe at any time.