What You Can Do Right Now To Prepare for Real Estate Investing
The richest people on the planet didn’t find success in the world of real estate accidentally. Instead, they formulated a plan, committed to that plan, and executed that plan. Long before they started buying properties, whether they were rental properties or fix-and-flips, those investors made preparations.
It’s been said that if you fail to plan, you plan to fail. While that motto can certainly be applied to any walk of life, it’s especially true for real estate investors. If you go into the world of real estate investing without a plan in place, you will quickly be swallowed up by other investors who have a plan in place. If you’re considering getting into the world of real estate investing, take some steps to prepare yourself today.
Study the Market
The three most important factors in real estate are location, location, and location. It doesn’t matter if you purchase the best home in the neighborhood if it’s a neighborhood that no one wants to live in. With that in mind, you should spend considerable time studying any of the markets that you plan on investing in. Contact local real estate agents who know the ins and outs of the market so you can get professional information.
Find out if the market is more favorable to renters than sellers and build your business plan accordingly. Also, spend some time looking at multiple markets. If you pigeonhole yourself into a single geographic area, you may be missing out on some great investment opportunities that are just a town or two away. Until you have thoroughly considered all of your market options, you shouldn’t even think about making an offer on a property.
Lots of startup real estate investors fail because they immediately try to jump in and buy a property that they are not prepared to effectively manage. They often buy large, multifamily properties that require a great amount of care, assuming that they will make fast money on rents. In other cases, these new investors buy fix-and-flip single-family homes like the ones they see on reality TV shows, not realizing that they can’t fix a home in 60 minutes like they do on these programs.
Consider starting out with some passive real estate investment opportunities, such as REITs and real estate syndications. These investments allow you to put in a smaller amount of money in exchange for a percentage of the profits the property generates. This also allows you to build wealth which you can use later while learning how the real estate investment industry works.
Starting With Rental Properties
As we’ve already established, the fix-and-flip model that has been made popular by reality TV shows is certainly one option. However, most new investors don’t realize that those people have massive crews of people who do a lot of the work for them. They also have access to advertising dollars and other funds that most new investors simply don’t have at their disposal.
With that in mind, it’s a good idea for new investors to plan on starting with rental properties. When you buy a property that you plan on flipping, you’re at the mercy of the market. There are multiple macroeconomic factors that dictate how fast a home sells and how much you can expect to get out of the property. Obviously, these factors also impact rental properties, but on a much smaller scale. When creating your business plan, allow for the first year or two to revolve around rental properties that generate perpetual income.
Platforms such as Airbnb have made it possible for people to dip their toe in the world of real estate investing without spending an excessive amount of money. If you have a guesthouse or another type of property that lends itself to these single-room, short-term rentals, consider starting there. Obviously, you won’t generate the kind of income that large-scale investing does. However, it can give you the opportunity to learn some of the smaller details that will be a major component of finding success as a real estate investor.
Your decision to get into the world of real estate investing can certainly be a profitable one. The kind of money that can be made through successful real estate investing is incredible. It can allow you to build your own net worth while also putting your heirs in a position to reap the benefits of your hard work. However, it should all start with a strategic plan.