In the United States, the real estate industry is worth $155 billion dollars. In other words, it's a massive industry.
In fact, some of the wealthiest people in the world got their wealth by investing in real estate. It's a great investment!
So if you're wondering how to get started in real estate investing, this guide is for you. We've compiled everything you need to know to begin.
Check it out below!
Real Estate Investing Definition
First of all, let's start by talking about the definition of real estate investing. Simply put, it's the entire process of purchasing, owning, and managing properties for a profit.
It includes owning a piece of real estate and renting it out, earning a steady stream of income, as well as eventually selling properties, generating additional cash.
How Can You Become a Real Estate Investor?
Now let's discuss the steps it takes to become a real estate investor.
First, Get Educated
If you're thinking, "Oh no, I've never taken real estate classes nor did I major in real estate," don't worry! That's not the only way to get into the business.
The biggest thing is becoming familiar with the ins and outs of the industry. You need to have a solid understanding of the basics because if not, you won't be able to compete in this highly intense market.
Here are some of the things you should understand:
- Investment strategies
- Legal aspect of investing
- Different types of properties
- How to acquire financing
These are just the basics. There are lots of other topics you should be familiar with as well.
To get this knowledge, do some research. There are lots of great books and online resources out there. Also, consider finding a mentor who is experienced in the field.
Make a Plan
Have you ever left for a road trip to a new place and forgotten your map? It's tough to know how to get there without directions.
The same is true for your endeavors as you're starting out in real estate investing. You need to create a business plan before you dive in.
As you do this, remember to start small. It's expensive to start out as an investor, so don't go crazy! Start with one property and grow from there.
Also set goals and make plans to achieve them. This will help you reach your full potential.
Once you've created your plan, don't be afraid to re-evaluate it down the road. The most effective investors consistently adjust and update their plans based on market conditions.
Analyze the Market: Another Tip about How to Get Started in Real Estate Investing
Next, it's crucial that you understand the housing market. Conduct a real estate market analysis to start. This will help you pick the right type of property for your specific situation.
You'll also gain insight into the profitability of each type of property. Remember that you should never invest in a property with a rate of return lower than 8 to 10%.
Also, consider if now is the best time to invest. Is it the right time to be buying instead of selling? Should you wait a year or two before you begin?
When you've done this market research, you'll have a better understanding of what your strategy should be moving forward.
Choose a Prime Location
Now it's time to start thinking about where you'll invest. This can have a big impact on the profitability of your properties!
This is because location impacts the price of the property, how much you can charge for rent, appreciation, and much more.
So as you're looking, don't just try to find the cheapest thing out there. It's probably cheap for a reason.
Instead, find a property that's in good condition in a great area. It will pay off big time in the future.
Decide on Your Property Type
Let's talk about property types. This is a huge decision when it comes to your first real estate investment.
That's because there are so many options out there. The two main categories of real estate are residential and commercial.
Residential properties can include single family residences and other multi-unit properties, like a duplex or triplex.
Commercial properties can include multifamily, office, hotels, shopping centers and a few others. Among these commercial property types, the multifamily real estate market has been a safe investment choice over the last few years.
There are pros and cons to all of these types. What works best for your situation? Do your research beforehand so you know what you're looking for when you start your search.
Compare Before You Buy
Before you sign on the dotted line for any property, make sure you're getting a good deal.
Do some research about similar properties to the one you're purchasing. What did they sell for? What do they rent for?
Also, think about how many bedrooms and bathrooms they have compared to yours. How old is it?
All of these factors are important to consider. More than anything, you just want to make sure you're not being ripped off.
Rent for the Right Price
Once you've purchased your property, it's time to decide on your rental price. This will directly affect the return on your investment, so it's important to consider.
If you charge too low of a price, you'll miss out on profits for no reason. But if you charge an overpriced amount, you'll have a hard time finding and keeping tenants.
See what other people are charging for similar units in your area. This can be done through a simple online search.
Well, there you go: everything you need to know about how to get started in real estate investing. Now that you've gone through these tips, it's time to develop your strategy!
Have questions or want to learn more? Get in touch with us any time.