Real estate investing can be quite overwhelming to most people, especially for first-time investors.
That’s because, to be successful in this industry, there are a number of things you need to learn first to gain the confidence you need to be successful.
Here are our top ten tips for first-time real estate investors. They contain exactly what you need to know for a successful entry into the industry:
1. Stay within your budget.
One of the biggest reasons why people fail in real estate is because they fail to stick to their budget.
Real estate investing requires a lot of financing.
The only way for your investment process to run smoothly is by ensuring that you can afford to pay the incoming bills.
Avoid overspending because you may end up with a half-baked deal or a property with no money for renovations or proper maintenance.
2. Be smart about how you interpret marketing promises.
Let’s face it. Real estate agents and sellers will stop at nothing to make sure they make a sale.
Even if it includes exaggerating a bit in their adverts or underplaying necessary renovations to the property.
Regardless of how sweet a deal seems to be, always make sure there is sufficient and concrete facts to prove its worth.
3. Do some research.
Just like in any type of investment, you have to do your homework.
The only way to minimize your chance of failure is to make sure you understand the industry.
Luckily, getting information about any property market is quite easy. There are tons of resources, articles, and posts online that can help feed your curiosity about the property market (like this one).
It’s also a great idea to learn about real estate terminologies/jargon so that you can understand and communicate with your real estate network.
4. Make sure you can handle being a real estate investor.
Don’t invest in real estate just because someone told you it’s a lucrative industry.
You have to know that it’s for you. Real estate requires a lot of commitment, patience, and willingness to learn.
That’s why, as an investor, you have to stay up-to-date about everything concerning the real estate market.
Make sure that you are mentally prepared and strong enough to handle all the hurdles you may face during your real estate investment journey.
5. Learn everything you need to know about your specific market.
Due diligence is always the best and most effective way of making smart real estate investment decisions.
That means studying your area. It’s important to know its history, perks as well as downsides.
Try to figure out whether or not anyone would want to live there. Things like good schools, amenities, and proximity to offices are factors that make an area attractive to more prospective tenants.
On the other hand, high crime rates, poor infrastructure, lack of basic amenities and services can make it hard for you to find tenants or buyers.
6. Do your calculations.
Obviously, before investing, you’ll have to evaluate the profitability of your venture. Ask yourself whether this deal worth pursuing or not.
After you do that, try to find your answers in the numbers.
- Calculate the amount of ROI you should expect.
- Determine how much time and money it will cost you to ready the property for tenancy or sale.
- Find out how big your tax obligation and deductions will be.
- Factor in all the possible expenses you’ll incur to run and manage the property and so on.
If – by any chance – you realize that you will be making small or no profits from the investment, walk away from the deal.
7. Avoid emotional investing.
In real estate, impulsive and emotional purchases are not advisable.
Sometimes, deals that look too good to be true are never what they seem. You should always detach yourself from investments when buying.
That way you’ll be able to make sound investment decisions by considering all important factors including:
- Capital appreciation
- Average rental prices
- The property’s repair and maintenance needs
- ROI estimates and so on
- Network with local and successful real estate investors.
The best way to learn how real estate investment works is by consulting with those who’ve already done it.
Experience is the best teacher. Plus, you’ll get to know about the pitfalls you should avoid as you begin your property investment journey.
Experienced investors are more of professionals in the industry. They have a lot of valuable information, tips and pieces of advice you can use.
Most of them will be more than happy to share their success stories with you.
8. Expect that you’ll make a few mistakes along the way.
As a new investor, making mistakes will be part of your learning process.
It’s the same as trying to learn how to ride a bike – you’ll fall down a few times before you master it.
Don’t be afraid of making mistakes. But when you do, make sure you learn from them.
That’s because making the same mistake twice can be costly.
9. Don’t be afraid to start small.
It’s natural to want to invest big in real estate. After all, the more you invest, the higher your ROI, right?
Any smart investor will tell you to start small.
Because you are still new to the industry. Investing a lot increases the risks of losing some -or all- of your capital.
Mitigate your risks by starting with a small project. If it’s successful – or after you’ve familiarized yourself with the industry -, then go for a bigger project.
In summary, investing in real estate is a great experience, especially if you prepare yourself in advance for the venture.
Always make sure that you have everything you need before making investment decisions.
With the help of the tips above, making a wise real estate investment will be a walk in the park for you.