How to Get Started As a Real Estate Investor

If you are looking to start investing in real estate, there's a lot you will need to learn, but don't let that intimidate you. Real estate investing can be an easier alternative to stock investing if you follow the right approaches. 

Like in any other investment vehicle, there are steps you will need to take, from planning an investment strategy down to managing and reselling a property to another investor. Learning the fundamentals of real estate investing is crucial to your journey. Let's take a look at a few things you need to take into heart.

1. Set your goals

What are you going to achieve through real estate investing? Are you looking to open a new source of income in addition to your day job? Do you want to build wealth you can pass onto the next generation? Knowing your motivation to invest helps you identify the right approaches that will take you closer (and faster) to your goal.

Setting a specific goal also allows you to determine your financial maturity and tolerance for risk. If your goal is to build a multi-million dollar portfolio within five years, then you are the type of investor who would go all in.

2. Know your investment options

After determining your investment goals, you will also need to identify your niche. Aside from buying single-family properties and renting them out for passive income, you can also delve into fix-and-flipping. This niche involves buying distressed homes at a lower price, fixing them, and selling them at a profit.

Another approach is buy-and-hold. This involves buying a property and holding on to it as it builds value. Once it has reached a certain period, you can sell the property at the appreciated price. There are other investment strategies you can check out, but you still need the right amount of resources to fuel your investment. 

3. Know your sources of financing

Where will you get the capital for purchasing your first real estate investment? Your savings won’t be enough to cover the down payment. A better option is to pool money from friends and family members and sign up for a loan through institutions like the FHA, Freddie Mac, or Fannie Mae. If you are a retiree, you can always tap into your self-directed IRA or 401K plan for the funds you need.

4. Get a mentor

Setting your goals, investment strategy, and financing strategy is only half the battle. Before you purchase a property, make sure you understand the most important concepts. The cap rate, for instance, is critical before and after purchasing a property as it helps you determine the profitability of a real estate asset. Apart from that, you will also need insights into current market conditions and interest rates. You can learn all of these by yourself, but it matters to find a mentor who is willing to share with you the tricks of the trade.

If you’re ready to invest in real estate, don’t rush the process. Take time to learn as much about the field as you can before you jump in. The tips above should lead the way.