3 Things You Must Do to Succeed at Real Estate Investing

Over the past decade there has been a surge of interest in investing. This all began when the financial crises of 2008 occurred and just continued flooring investors in the years that followed. Once stable or reliable investment vehicles were not so trustworthy and the idea of stability seemed to vanish overnight. Even today we can see roller coaster like movement in everything from stocks and bonds to hard asset values like the price of gold. If don't agree, consider that the value of a bitcoin (in early March of 2017) was more than the value of an ounce of gold.

Investing has gotten tricky and complex, yet real estate is still a powerful asset class. In fact, the wealthiest people in the world still hold real estate as their primary assets over anything else, and Warren Buffett recently encouraged people to invest in real estate and rental properties.

So, if real estate investing is such a good option, how do you go about it successfully? That, as Shakespeare said, is the question. And we have three answers for it.

1. Be sure you understand real estate investing basics

If you cannot explain how you make money by investing in real estate, you are starting to invest at a disadvantage. For example, there are four ways you earn from investing. You can use a cash flow method that brings income from real property (usually in the form of rent). You can earn by buying, improving and selling. You can earn commissions from property transactions and you can also earn through ancillary investment (such as running a coin-op facility in a large apartment complex).

Naturally, those first two methods are the most common, and neither of them is simple or easy. For instance, what is the rate of return on any of the ways to invest? What funding sources will you use? Who will manage rentals or other investments?

2. Be sure you understand how you intend to profit off investing.

This is different from the basics because it means you are clear about the four key ways you can get a return and which of them are possible with any of your investment choices. As we already mentioned, cash flow is one of the key ways to earn a profit, but so too is appreciation. This is simply the difference between the purchase and sale price. You also have the tax benefits of real estate investing to consider and this is often seen as one of the main reasons to invest in the first place. Lastly, loan amortization that leads to equity in your holdings is a final way to "profit" from investments.

3. Be sure you know how to do the right research and leg work

This is more challenging than many new investors realize. It means understanding the markets, having very clear goals, and understanding what the real returns will be on any given investment. This last thing you must do to succeed at real estate investing is the most challenging of them all. It is a main reason that individual investors turn to options like REITs, real estate investment clubs and turnkey options. It cuts out all of the hard work and helps them realize their goals. If you are struggling with getting started in real estate investment, one of these approaches may be your shortcut to success.