6 Steps to Successfully Breaking Into Real Estate Investing

Are you considering investing in real estate? Maybe you’d like to dive in, but you’re not sure how an average person gets into such a competitive industry. If so, you’re not alone. There’s no shortage of people who would love to invest in real estate but aren’t quite sure where to start.

Real estate investing is a great way to build wealth and one of the most popular methods of generating passive income. At first glance, real estate seems complicated and perhaps even out of reach. While complexities do exist, any novice investor can buy their first property and branch out from there. Here are six steps that will provide clarity as you consider real estate investing.


1. Be absolutely clear about your goals.

Start your real estate journey by being entirely honest with yourself. What is the ultimate goal that’s motivating this investment project?

Are you hoping to save up for retirement? Then you may want to put your money into a real estate investment trust (REIT). Are you looking to supplement your current income or transition from being a renter to an owner/occupant? Either goal could be served by buying a duplex, living in one half, and renting out the other. Maybe you’re highly skilled at remodeling and want to leverage that skill into becoming your own boss. You could be a successful house flipper in the making.

Whatever your goal may be, identifying it clearly will help you determine the best route for meeting it. On the flip side, failure to think about this all-important question could lead to problems in the future. For example, say that you decide to buy investment properties for their present-day income potential. If you begin to count on those monthly checks, and they dry up — for whatever reason — you’ll find yourself back at square one. That could be a real problem if you’re planning to use your investment cash flow to fund your lifestyle.

2. Conduct exhaustive research

Set aside blocks of time every week to learn more about real estate investing. Scour online articles and study videos to uncover new angles and strategies. As your investment project gains traction as a result of your increased knowledge, you’ll begin looking forward to research.

Set aside blocks of time every week to learn more about real estate investing. Scour online articles and study videos to uncover new angles and strategies. As your investment project gains traction as a result of your increased knowledge, you’ll begin looking forward to research.

Don’t go it alone, either. You might consider becoming a student by working at a reduced rate for a successful realtor in your community. Let friends and family know about your plans and indicate your interest in learning more from a mentor. You might even have a real estate investor among your extended family who can show you the ropes. Make connections on sites like LinkedIn and seek out stories from other investors who made it happen.

Start by admitting that you have a lot to learn. Find out everything there is to know about rental income, buying properties, and financing. You can avoid mistakes when purchasing a property by heeding advice from the pros and learning from the missteps of others.

3. Decide ahead of time how much you can invest.

Before you invest a single dollar, consider in advance how much you are willing to risk. If the early months of 2008 taught real estate investors anything, it’s that the bottom can — and sometimes does — fall out.

So put serious thought into your financial strategy before your real estate journey moves from a hypothetical exercise to real-world experience. Finding an approach that works for you will be much easier if you keep your ultimate goal from Step 1 at the forefront of your thinking.

In large part, your available assets and credit history will determine the maximum you have to invest. But that’s not the whole story. While a conventional mortgage might require 15%-30% down and a robust credit limit to gain approval, there are other options. A home equity line of credit, a loan from family or friends, or seller financing could provide the funds you need to get started. That said, you’ll want to ensure you don’t bite off more than you can chew.

4. Begin searching for your first investment property.

Once you’ve determined how much you can invest, start looking online for properties that have come on the market. The research you began in Step 2 should serve as a guide to which neighborhoods interest you. By now you should know all about home values, desirable school districts, utilities, crime rates, local amenities, and future planned developments.

If you’ve narrowed your search to specific areas, take casual drives through these areas on a routine basis. More than one savvy real estate investor struck paydirt by stumbling onto a promising FSBO (for sale by owner) that wasn’t listed online.

You can also find off-market investment opportunities by partnering with specialty real estate firms looking to expand into your area. These firms typically specialize in locating properties that become available in distress situations such as divorce, death, or downsizing.

5. Consider various types of properties.

Don’t limit yourself to looking only at traditional single-family homes. You might also consider multi-unit buildings. Although maintenance and upkeep costs will be higher, so will the potential profit.

One place to begin studying rentals is with apartment locator services. You’ll discover plenty about how landlords market properties. You’ll also learn more about what renters in your area are willing to pay, and for what.

With this knowledge, you can begin to assess what you’d have to charge in rent to yield a return on a multi-unit property. This is also the time to determine whether the amount you have to invest (see Step 3) is sufficient to cover a multi-unit building. A duplex could be a reasonable place to begin.

6. Make sure financing doesn’t trip you up.

You’ve found something you’re interested in buying. Great! In today’s market, however, you’ll need to move fast. Be prepared with pre-approved financing or, better still, 100% of the asking price waiting in a liquid account. If you come to the seller with cold, hard cash, you’re far more likely to strike a deal below the asking price.

Stick to the budget you set before you begin looking. Doing so will be especially important if you’ve used that budget figure to borrow money from family members or friends. If you need additional funding, revisit Step 3. Decide whether the investment opportunity you’ve discovered is worth applying for loans or perhaps selling existing assets to raise the additional funds.

Many beginners believe real estate investing is too expensive and difficult, but it doesn’t have to be that way. By following the steps provided in this article, you’re that much closer to investing and making money. There’s still a good deal of work involved, true, but you can do it.

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