Starting your real estate portfolio can seem like a bit of a challenge. But once you learn a few tips, investing in real estate could become one of the best decisions you ever make.
We have put together 5 tips to help the first time real estate investor make their first investment!
Tip #1: Do Your Own Research, and Never, Ever Stop
Do your own research. Don’t rely on agents or real estate professionals to provide you with everything you need to know. Ask questions, and take in as much information as possible. From the minute you decide you want to invest, and throughout your entire investing journey, continue learning and researching. Learn the areas, trends, property specifics and any other information you can get your hands on.
Educate yourself continuously and surround yourself with like-minded individuals who share a common goal. Find people who are doing similar things and share experiences and stories. Find a mentor and learn as much as you can from people who have been there before. Learn from the professionals and share stories.
Tip #2: Set Up and Structure Yourself Properly
Even after doing all the research in the world, you will want to enlist some help from the professionals to ensure you have structured everything property. Build a team of quality people you can count on. This should include a lawyer, tax accountant, real estate attorneys, agents and someone at the bank you can work closely with. Forming these relationships early will help you in the long run. You will be more adequately prepared to deal with new and challenging situations if you have the right people on your team.
Tip #3: Know Your Options
There are many options when it comes to starting your real estate portfolio. You don’t have to stick to single and multi family rentals. You could consider leasing a commercial property to local businesses, renting land to people to use recreationally, or even think about investing in mobile homes. Many people make a lot of money by pursuing investments that are off the beaten path. You can also look into REIT’s, or other investment groups. You will have to be able to pull your weight, but working with experienced investors is an excellent way to learn the ropes.
Tip #4: Make Sure It’s Right for You
Before you dive in, make sure that what you’re investing in, really makes sense for you. Let’s say you’ve heard about all the money to be found in foreclosures. Before you purchase, ask yourself, do you really understand what goes into rehabbing a home? Can you fix drywall, replace windows and copper pipes? If you have never done it before, you might want to reconsider making a fixer-upper your first investment.
If you are investing in a rental property, will you be doing the work, or will you be hiring a property manager? You will need to hammer out all of these details before you can be sure you are making a good investment.
Tip #5: Calculate Your Margins
You will want to accurately be able to calculate your returns and expenses.Be realistic, not hopeful. There are many methods for calculating these numbers. The 1% rule states the property should bring in 1% of the final sale price each month. The 50% rule states that about 50% of your profits will go towards house expenses… other than your mortgage. Set realistic expectations and goals so you can see great returns as a first time real estate investor!