This article will acquaint anyone just getting started in real estate investing with some basic elements about investing in rental properties. It’s not rocket science, but it does cover six real estate investing tips beginners can use to launch their real estate investing career and hit the ground running.
In this first installment, Starter’s Guide for Real Estate Investing Beginners, Part 1, we’ll discuss the first three tips.
1. Develop the Correct Attitude
To stand a chance of succeeding at real estate investing, foremost, you must understand that real estate investment is a business, and from that very moment you decide you want to jump in and buy your first income property, you become the CEO of that business.
As your first order of business, then, it’s crucial to develop the correct mind-set about investment real estate and be able to make this distinction between buying a home and investing in real estate:
You buy a home to live and raise a family. You buy real estate investment property to pay for the home, live comfortably, and raise your family in style.
Here’s the problem.
Beginning investors too often set out to purchase income property incorrectly thinking that investment properties are a home. That it must provide good curb appeal, exciting amenities, desirable floor plans, and a desirable area to live. This is not the case with income-producing property, though. Remember, real estate investing is a business, and the object it to make money.
Unfortunately, real estate investors that fail to make this distinction between home and investment can end up suffering unfavorable results.
Some, for instance, wrongly buy an investment property mistaking beauty for performance and then never make a dime from their investment, or even worse, they actually lose money on the investment. Conversely, some miss opportunities to make real money because an income property lacks luster. They walk away because the thought of living in the rental property is unimaginable, and because the property isn’t beautiful enough, they make the decision not to invest on no other grounds but the fact that they wouldn’t want to live in the property themselves.
Beginning real estate investors must bear in mind that investing in real estate is not to provide you with a place to live; chances are that you will never live inside one of the units you purchase. You are buying investment real estate to make money, period.
As one very successful real estate investor once said, “Only women are beautiful, what are the numbers?” You will not succeed at real estate investing until you acknowledge that beauty is only skin-deep and what counts most is the property’s financial performance.
2. Develop Meaningful Objectives
A meaningful set of objectives that helps frame your investment strategy is one of the most important elements of successful investing. Just be realistic. We may all desire to make millions of dollars from real estate investing, but entertaining that fantasy is not the same as expressing a specific goal or goals and a method on how to achieve it. Here are some suggestions.
- How much cash are you willing to invest comfortably?
- What rate of return are you hoping to generate?
- How long do you plan to own the property?
- What amount of your own effort can you afford to contribute to the day-to-day operation of running the property? And so on…
3. Develop Market Research
If you’re new to real estate investing, we’ll assume that you know very little about prices for rental properties in your local market. If true, that you haven’t had much exposure to what’s been selling, then you must do some research. Before you take too many steps forward or make any investment decision, learn as much as possible about local income property values, rental rents, and occupancy rates. The more you know about investment real estate prices and trends in your area, the better prepared you are to recognize a good (or bad) deal when you see it. Here are some helpful resources you might want to consider.
- A local appraiser
- The county tax assessor
- A qualified local real estate professional
- A local property management company
To be Continued
In our next installment, we’ll cover three more real estate investment tips you don’t want to miss if you’re a new real estate investor about to start real estate investing.
