Let’s discuss real estate investing for beginners.
How do you start investing in real estate as a beginner? That is the million dollar question that I certainly asked myself many times before I bought my first investment property.
There are countless books, blog posts, seminars, classes, and other educational material around the topic of real estate investing that it can seem extremely overwhelming.
My goal with this post is to give you peace and some direction on how to get started as a real estate investor.
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Why Do You Want To Be A Real Estate Investor?
A real estate investor can mean many different things. As you conduct research around “real estate investing for beginners”, you’ll quickly realize that some real estate investors want to buy residential properties to flip them and some to rent them.
Others only invest in land or commercial real estate. Some investors are only interested in apartment buildings. Some do it for cash flow; others for tax purposes…and the list goes on.
Before answering the “how”, you need to answer the “why.”
Here are some questions I recommend asking yourself to better understand your “why”
- What intrigues you about being a real estate investor?
- Is your goal to do real estate investing full-time or part-time?
- What skills do you feel you possess that would make you a great real estate investor?
- Do you feel you have the risk-tolerance to handle the ups and downs of real estate investing?
- Are you interested in buying real estate to flip (sell) or hold long-term (rent)?
- Do you feel you are in a position financially to begin investing in real estate?
- How much time do you have every week to devote to real estate investing?
What Kind Of Real Estate Do You Want To Invest In?
A recommended strategy for real estate investing for beginners is to begin with single family homes, but you can choose to invest in other types of real estate as well such as multi-family, commercial, & land. Here’s a quick definition of each of these:
- Single-family – stand-alone house designed to house a single family
- Multi-family – multiple housing units within a single building. Duplexes, triplexes, fourplexes, & apartments are considered multi-family properties
- Commercial – any property used for business activity
- Land – vacant land either for residential or commercial use
I think in most markets, you’ll find the majority of viable real estate investment opportunities will be single-family homes. Additionally, from a cost-perspective, single family homes usually offer the lowest barrier to entry.
Name Your Price
You’ll need to determine how much you’re comfortable paying for a property. Unless you’re looking for a property that is move-in ready, your price should also include a renovation budget. This will obviously vary depending on location.
Where Do You Want To Invest In Real Estate
In terms of real estate investing for beginners, I strongly suggest that you consider investing in real estate that is relatively close to where you live. The primary reason is that no one is going to care about your investment property as much as you do.
You want to regularly inspect your property and make sure your tenants are keeping the lawn mowed, that they’re not stacking trash up behind the house, that they haven’t moved in their entire extended family…you get the idea.
I know. I know. You can have a long-distance relationship with your investment property, and hire a local property manager, but, TRUST ME, it’s better to be close. I’ll talk more about property managers in a separate article.
Even if you’re looking to buy and flip long-distance, your listing agent isn’t going to drive by your property regularly to make sure some homeless person hasn’t pried open a window and made your flipper their permanent residence.
When I first started investing in real estate, I was living in Texas, and buying houses in Missouri. After about a year, I decided to move to Missouri to be closer to my investment properties, and it’s a VERY good thing I did.
How To Identify If An Area Is Good For Real Estate Investing
Regardless if you’re looking to buy and flip or buy and hold, you want to be able to buy properties at a price point that helps you achieve your real estate investment goals.
It’s easiest to do that in a buyer’s market. A buyer’s market means that the inventory of properties on the market is larger than the demand for those properties.
In other words, there are more properties than there are buyers.
How do you determine if a certain area is more of a “buyer’s market”?
The best thing to do is to consult a Realtor local to the area you want to buy properties in.
Furthermore, you want a Realtor with experience (at least a couple years), and, ideally, one who has experience working with investors.
Be open with them about your goals as a newer real estate investor, and see if they feel the area poses the right market for you to achieve those goals.
Realtors get paid a commission when a property is sold, so there should be no fee for a consultation.
real estate investing for beginners: Next Steps
Once you’ve clearly identified your “why”, the “what”, and the “where”, the next step is to speak with a bank about financing, and start looking for a property.