how to become a real estate investor

You may find it hard to access the right information on the internet, so we are here to help you in the following article, providing the best and updated information on real estate investing for beginners. Read on to learn more.We at collegelearners .com have all the information that you need about learning how to become a real estate investor. Read on to learn more.

how to become a real estate investor

10 Habits of Successful Real Estate Investors

Investing in real estate can be successful, but going it alone can be challenging and highly risky. Joint ventures, wholesaling, and property management are just a few of the ways investors can profit from real estate. It also takes a little savvy to become successful in this highly competitive arena.

While certain universities offer general coursework and disciplinary programs that can benefit real estate investors, a degree is not necessarily a prerequisite to be profitable in real estate investing. Whether an investor has a degree or not, there are certain characteristics that top real estate investors commonly possess.

Here are the 10 habits that highly effective real estate investors share.

KEY TAKEAWAYS

  • Real estate is a challenging business that requires knowledge, talent, organization, networking, and perseverance.
  • Becoming knowledgeable and educated about the real estate market is crucial, but often this comes with more than just in-class learning.
  • Understanding the risks, investing in an accountant, finding help, and building a network are all part and parcel to the successful real estate investor.

10 Habits Of Successful Real Estate Investors

1. Make a Plan

Real estate investors must approach their activities as a business professional in order to establish and achieve short- and long-term goals. A business plan is a good idea to craft, as it also allows investors to visualize the big picture, which helps you maintain focus on the important goals rather than on any minor setbacks.

Real estate investing can be complicated and demanding, and a solid plan can keep investors organized and on task. The plan would include estimated outlays and inflows of cash from rentals, how many units to own, when to refurbish or upgrade units, demographic changes, and anything else that could impact your investment over time.

2. Know the Market

Effective real estate investors acquire an in-depth knowledge of their selected markets, such as narrowing in on a particular geographic region and focusing on residential vs. commercial properties. Keeping abreast of current trends, including any changes in consumer spending habits, mortgage rates, and the unemployment rate, to name a few, lets real estate investors acknowledge current conditions and plan for the future. This enables them to predict when trends may change, creating potential opportunities for the prepared investor.

3. Be Honest

Real estate investors are usually not obligated to uphold any particular pledge of ethics. Although it would be easy to take advantage of this situation, most successful real estate investors maintain high ethical standards. Since real estate investing involves people, an investor’s reputation is likely to be far-reaching. Effective real estate investors know it is better to be fair, rather than to see what they can get away with.

4. Develop a Niche

It is important for investors to develop a focus in order to gain the depth of knowledge essential to becoming successful. Taking the time to build this level of understanding of a specific area is integral to long-term success. Once a particular market is mastered, the investor can move on to additional areas using the same in-depth approach. Some niches might be high-end residential, low-income multi-unit housing, or rural farm rehabs.

5. Encourage Referrals

Referrals generate a sizable portion of a real estate investor’s business, so it is critical that investors treat others with respect. This includes business partners, associates, clients, renters, and really anyone with whom the investor has a business relationship. Effective real estate investors pay attention to detail, listen and respond to complaints and concerns, and represent their business in a positive and professional manner. This builds the kind of reputation that makes others interested in working with those investors.

6. Stay Educated

As with any business, it is imperative to stay up to date with the laws, regulations, terminology, and trends that form the basis of the real estate investor’s business. Investors who fall behind risk not only losing momentum in their businesses but also legal ramifications if laws are ignored or broken. Successful real estate investors stay educated and adapt to any regulatory changes or economic trends. Moreover, keep up on real estate, tax, and lending laws and regulations that could directly or indirectly impact your business.

7. Understand the Risks

Stock market investors are inundated with regular warnings regarding the inherent risks involved in investing and the potential for loss. Real estate investors, however, are more likely to see advertisements claiming just the opposite: that it is easy to make money in real estate. Prudent real estate investors understand the risks—not only in terms of real estate deals but also the legal implications involved—and adjust their businesses to reduce those risks.

8. Invest in an Accountant

Taxes comprise a significant portion of a real estate investor’s yearly expenses. Understanding current tax laws can be complicated and take time away from the business at hand. Sharp real estate investors retain the services of a qualified, reputable accountant to handle the business’s books. The costs associated with the accountant can be negligible when compared to the savings a professional can bring to the business.

9. Find Help

Learning the real estate investing business is challenging for someone attempting to do things on their own. Effective real estate investors often attribute part of their success to others, whether it’s a mentor, lawyer, or supportive friend. Rather than risk time and money tackling a difficult problem alone, successful real estate investors know it is worth the additional costs (in terms of money and ego) to embrace other people’s expertise.

10. Build a Network

A professional network can provide important support and create opportunities for both new and experienced real estate investors. This type of group, comprised of a well-chosen mentor, business partners, clients, or members of a non-profit organization, allows investors to challenge and support one another. Because much of real estate investing relies on experiential learning, savvy real estate investors understand the importance of building a network.

The Bottom Line

Despite ubiquitous advertisements claiming that real estate investing is an easy way to wealth, it is, in fact, a challenging business requiring expertise, planning, and focus.

In addition, because the business revolves around people, investors benefit in the long run by operating with integrity and by showing respect to associates and clients. Though it may be relatively simple to earn short-lived profits, developing a long-term real estate investing business requires skill, effort, and these 10 important habits.

real estate investing for beginners

Real Estate Investing For Beginners: Getting Started

Real estate investing for beginners

A lot of modern investing is relatively hands-off. You buy a share of a stock or an index fund, then just hold it and let it grow for years or even decades. And while this is certainly a smart and simple way to invest, it’s not the only way.

For would-be investors who are attracted to a more tangible and hands-on method of investing, real estate is a popular option. Granted, it’s not the easiest method and there can be a steep learning curve as you begin. But the payoffs are potentially quite lucrative, and if “becoming a real estate mogul” is on your bucket list, you have to start somewhere!

Let’s go over some of the key things to know as you consider real estate investing for beginners.

Why invest in real estate?

Historically real estate has been one of the most dependable ways to become wealthy. And many of today’s millionaires say it’s still a smart investment, for a variety of reasons.

For one thing, investing in real estate gives you a way to diversify your investments. “Don’t put all your eggs in one basket” is tried-and-true advice for a reason. There are a lot of moving parts to the economy, and there’s always the chance that one can crash while the others thrive. Having exposure in several different markets helps insulate you from risk.

Secondly, real estate gives you ownership of a tangible asset that can appreciate. While I enjoy logging into my portfolio and seeing my stock values increase, it’s all very abstract. There’s something appealing about having a physical investment that you can actually see, visit, and improve.

And since people will always need a place to live, real estate tends to hold its value as long as the property is maintained well and the area is appealing.

There’s also a decent amount of flexibility when you own real estate. You can decide whether to rent out your property, sell it, subdivide it, rezone it for a different purpose, and so on. This way, you can respond to changes in the economy in a way that still makes your investment useful.

All of that said, there’s also a big note of caution here. Real estate can be a large and expensive undertaking, and as the housing market crash of 2008 illustrated, it’s never a sure thing. Especially when it comes to real estate investing for beginners, it’s wise to proceed with caution. You don’t want to stretch your finances too far before you’re ready and end up with debt that you struggle to repay.

Different ways to invest in real estate for beginners

There isn’t just one way to invest in real estate, so don’t worry—you don’t have to commit to buying a whole apartment complex right away! Here are four of the main methods of real estate investing for beginners.

Real estate investing for beginners

Owning rental property

We’ll start with the traditional method: buying a property and renting it out to tenants. You can buy anything from a single-family house to a multi-family dwelling to business property or a warehouse. Then, you can rent it to tenants. If you’d like a hands-on experience, you can be the landlady yourself.

If your goal is to generate passive income instead, then you can hire a property management firm to take care of the day-to-day logistics on your behalf. It will cut into your profits, but also save you time and stress.

Many people also like to “house hack,” where they purchase a house, duplex, or other types of multifamily unit, live in one part, and rent out other parts of the property. This can help you pay your mortgage early or even cover your expenses entirely so you’re essentially living there for free.

How you make money owning rental property:

  • Charging your tenants more in rent than you’re paying in expenses
  • Asset appreciation (selling for more than you paid when the property has increased in value)

Pros of owning rental property:

  • Building equity in a long-term asset that can gain value over time
  • Generating reliable cash flow since your tenants will usually pay monthly
  • Having the flexibility to sell or use the property for something else if you decide

Cons of owning rental property:

  • Assuming risk—the property may not rent quickly, there may be damages, or the property may lose value
  • Handling logistics of tenant management
  • You’re responsible for expenses like repairs, insurance, property taxes
  • Can be a long and costly process to sell

Buying REITs

REITs are undoubtedly the easiest form of real estate investing, making them an attractive option for beginner investors. REIT stands for “real estate investment trust”. These are companies that usually own and sometimes operate a variety of real estate properties such as hospitals, warehouses, shopping centers, residential buildings, and more.

Many REITs are publicly traded on stock exchanges, which is how they become available to individual investors like you. You can choose from several different types of REITs and buy shares of any you choose. Single shares tend to cost below $100 (I’ve even seen some below $5), making them very accessible.

How you make money with REITs:

  • Being paid dividends on shares you own, usually quarterly, from the income generated by the REIT’s holdings
  • Selling your shares at a higher price than you paid

Pros of REITS:

  • Ease of access—you can buy shares of a REIT on just about any investment platform
  • Historically good performance with high returns
  • Diversification—REITs typically own a lot of different properties, and your investment gets you a fractional share of the income from all of them
  • No work and low risk since you’re not personally responsible for a property’s success or failure
  • Money is easily accessible to cash out. Just like with regular stocks, you can sell your shares as long as there are buyers

Cons of REITs:

  • Not hands-on, so it might not feel like truly being involved in real estate
  • The experience isn’t different than investing in stocks
  • You don’t have a say in a REIT’s specific holdings
  • No investment is totally risk-free

Flipping houses

The idea of flipping houses offers a totally different take on property ownership. Instead of a long-term endeavor managing renters and adding properties to your portfolio, it’s meant to be a temporary one.

Flippers buy houses or properties that need renovations, spend time fixing them up to improve the value, then turn around and put them on the market at a higher price. An ideal “flip” is a relatively short-term situation since the intention is to quickly sell and move on to the next.

How you make money flipping houses:

  • There’s just one way in this case: selling the house at a profit

Pros of flipping houses:

  • Extremely hands-on, a pro for those who enjoy that aspect
  • High-profit potential—the average gross profit is about $65,000, although that doesn’t factor in expenses, which can vary wildly
  • Good for those who already have relevant experience or connections in construction, painting, plumbing, realty, etc.
  • Can be a shorter-term commitment of a year or less (but this isn’t a guarantee)

Cons of flipping houses:

  • Lots of financial risks—the property might be more expensive to fix than anticipated and turn into a money pit for you
  • If it’s not a seller’s market, it could take more time to sell than you’d like and cost you even more in taxes and utilities
  • Requires lots of work and time to renovate the house and prepare it for sale
  • Money is illiquid until sold
  • Not a good idea if you don’t have a lot of relevant skills or connections to guarantee that work will be done quickly, affordably, and well

Real estate crowdfunding 

This one is a unique and fairly new method of real estate investing. Through real estate crowdfunding platforms like Fundrise and RealtyMogul, you can invest in specific real estate projects whose buyers are seeking loans. The platforms vet the buyers and projects to make sure they’re legit before presenting them to members.

There are two basic types of real estate crowdfunding: debt or equity investing. It sounds strange to invest in debt, but it basically means that you’re investing in a mortgage loan on a property, and receiving a set share of the interest as the loan is paid back.

Equity investing means you’re investing directly in a property and receiving a share of ownership, in which case you’ll usually receive a part of whatever income or profits the property generates.

Investing in a crowdfunded project is a level up from REITs for several reasons. First, most existing platforms require minimum investments of $1000-$5000.

Second, you’ll be investing in single projects that you choose (rather than a diversified collection), which makes an individual property’s success or failure a little more high-stakes.

How you make money with real estate crowdfunding

  • Regular interest or income dividends from your share of the property, usually paid quarterly
  • Redeeming shares (essentially “cashing out”) when allowed after a certain amount of time
  • A portion of the profits when the property is sold if you’ve kept your share

Pros of crowdfunding

  • Gives you the ability to participate in big real estate projects with just a few thousand dollars
  • You get to evaluate the details of each project and choose exactly what you invest in
  • It can be very educational to familiarize yourself with loan and real estate terminology so you can understand each deal’s prospectus. This knowledge can benefit you in future ventures

Cons of crowdfunding

  • It’s a new and still relatively untested space, without decades of statistics to look at
  • Risky because your investment’s success or failure is attached to a single property
  • Can be a 5+ year commitment; you can’t always cash out when you’d like

So, those are your four basic options. If you’re interested in REITs or crowdfunding, you can do it from the comfort of home. For ownership or flipping, you’ll need to hit the pavement and start hunting for deals!

Real Estate Syndication

Real Estate syndication is another way to invest in real estate. This is where investors put their money together to buy or build real estate. With real estate syndicates, there is greater buying power than investing as an individual.

They start out with a sponsor who originates the transaction. The sponsor makes money from rental management fees, monthly cash flow from rent, and capital appreciation. Sponsors solicit investors who make money from the monthly cash flow from rent and the real estate appreciation.

Real estate syndication differs from real estate crowdfunding in that they focus on large-scale investments. Syndication also requires a formal investment agreement and cooperation between parties.

Buying your first investment property

If you’re going with a traditional method of real estate investing that involves buying a property of your own, the next step is learning how to vet properties.

Of course, this involves a ton of location-specific factors and enough information to fill a book…which is why the next section has some real estate investing for beginners’ books for you to check out! As a jumping-off point, here are seven quick tips for buying your first property.

  1. Before anything else, brutally evaluate your current financial situation to decide if you’re ready. Ideally, you should have little to no debt, a lot of liquid savings to use for a down payment, a good credit score to qualify for good loan rates, and the time to dedicate to the work involved.
  2. Thoroughly research the areas and market trends in the locations you’re scouting. Are houses selling well or going stagnant on the market? Is it an area that people would want to live in?
  3. Start by looking for a smaller, safer investment to get your feet wet; don’t jump into an expensive property or a major fixer-upper right away.
  4. Have someone experienced examine the property with you to assess it for damage.
  5. If the goal is renting, decide whether you want to manage the property yourself or outsource it.
  6. If the goal is flipping, take inventory of your own skills that could be useful, and who you know that might be able to help for a quick turnaround.
  7. Evaluate all associated costs before buying, not just the purchase price. This means closing costs, property taxes, insurance, utilities, repair or renovation estimates, and more. It’s okay to ask contractors for quotes before you’ve committed to a purchase. Ultimately, the goal is to go in with your eyes wide open.

Real estate investing for beginners books

For more, let’s turn to the experts! These real estate investing for beginners books take a much deeper dive into many of the topics we’ve been discussing.

The Millionaire Real Estate Investor by Gary Keller

Who better to learn real estate investing than people who have become millionaires with it? This book collects wisdom gleaned from interviews with 120 millionaire real estate investors. It breaks down their strategies for success, debunks common money myths, and gives actionable advice for beginner real estate investors and beyond.

The Book on Rental Property Investing by Brandon Turner

This one focuses on how to build wealth and passive income with rental properties. It covers tips for finding good property deals, financing options, mistakes to avoid, and step-by-step strategies to follow for success in real estate.

What Every Real Estate Investor Needs To Know About Cash Flow by Frank Gallinelli

This book is all about crunching numbers. You’ll learn how to value a property using a wide variety of metrics, so you can make confident, data-driven decisions. Not sure what a “profitability index” or “capitalization rate” is? Time to find out!

The Flipping Blueprint by Luke Weber

For the future flippers out there, this book is a guide to the good, the bad, and the ugly (and how to make it through them all). Learn where to find deals, lenders, and contractors, and how to talk to them. Get practical tips for maximizing profits. The step-by-step blueprint format is perfect for beginners.

The Book on Tax Strategies for the Savvy Real Estate Investor by Amanda Han and Matt MacFarland

This might sound like an intimidating read, but it’s better to learn this stuff early than find yourself scrambling in April. It teaches you how to use the tax code to your advantage while staying on the right side of the IRS. You’ll be able to start smart, grow quickly, and potentially save thousands of dollars.

In conclusion

Learning real estate investing for beginners is just the beginning of a long and complex journey. But if you’re committed, determined, and willing to keep learning, it can be a rewarding and life-changing decision.

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