The world of real estate investing is full of high potential profits, but if you are just starting out, the whole field can be intimidating at times. In this article, we will give you some tips to help you along the road to success.
You do not need to have a real estate background
Commercial real estate investing can be distilled down to the concept of buying something, cleaning it up, and then selling (or renting) it for a profit. From there, you can build in details, such a leasing agreements, zoning, comps, commercial real estate financing, and everything else.
Find your niche
It is impossible to learn everything about real estate investing. Between all of the books, blogs, and podcasts, a person has only so much time and brain capacity to learn every aspect or real estate investing. This is why many people focus down to very specific types of properties. Some people specialize in flipping houses. Some like the security that comes with having multiple sources of revenue by renting out apartments. Still others focus on office buildings and large health care facilities. Find your niche, and build your real estate investing business on that, instead of trying to learn everything.
Separate business and personal expenses
Everyone knows to keep business and personal life separate, but this also carries over to expenses. Many newcomers to the world of real estate investing are tempted to use personal finances to leverage property, instead of seeking out loans or alternative funding. Using personal finances for real estate investing is a fast way to put your home, family, and personal credit in jeopardy. Always seek out external financing wherever possible.
Talk with other investors
Whether online or in your local market, it is always a wise move to network with other real estate investing professionals. They will give you the best insights to best practices, market trends, and how to get around obstacles that may come your way. Real estate investing is all about relationships, and the person you are meeting for the first time may become a valuable mentor or partner in the future.
Manageable real estate investing
Not everyone starts out by renting out an office high rise to billion dollar companies. Real estate investing should start with something manageable, like flipping a house or renting out a duplex. From there, you can move on to bigger and more profitable properties.
Always do your research
The real estate investing market is a very fluid industry, with new strategies and financing solutions evolving constantly. Always stay abreast of your particular niche to figure out new ways of doing things, or streamlining processes to get you to your profits faster.
Learn the terms
Real estate investing can seem like an alien world to newcomers. Terms like comps, seller carry backs, and mezzanine financing may be confusing at first, but by immersing yourself in the world of real estate investing, the language should become second nature in no time.
Break everything down into simple math
Real estate investing can deal with some fairly large numbers, and even small projects can really add up – especially if you have to renovate or rehab a property before selling or renting it out. Keep a running tally of expenses, and figure out your baseline number on a property. You may get a house for a really low price, but once you figure in materials, supplies, and cost of labor, you may have to sell that house at a little above market price just to make a profit. Luckily, there are numerous resources and free real estate calculators to help figure out costs and accurate pricing.
Hold onto your job
If you’re new to real estate investing, the odds are fairly good that you already have a job. Don’t quit, especially for the first year. That job is going to provide a steady income while you are still getting set up, and most newcomers don’t turn an immediate profit, so money has to come from somewhere. Some people really enjoy real estate investing, and transition away from their jobs as soon as they can. Others use real estate investing as a means to financial freedom, while keeping their regular jobs because they like the people, or they’re invested in a retirement program, or like the benefits.
Getting into the world of real estate investing is not without sacrifices. You may find yourself having to put off your yearly vacation in order to renovate a house. You may have to use a bonus from work to put a down payment on a property. You may find yourself working late at night, in the beginning, just to understand the market. All of those sacrifices pay off in the end.
Learn to be creative
One of the great things about real estate investing is that there is a lot of leeway as far as buying properties. Some sellers deal strictly with banks. Some are open to the idea of creative financing and even barter. Real estate investing is a puzzle, of sorts, and you need to find creative ways to arrive at solutions to buy property and still turn a profit. There is no one right answer real estate investing, but if you find a solution that works, it can lead to major profits.