Do you want to get started in the real estate investing world but don’t know where to begin? We’ve got you covered. In this post, we’ll give you five beginner do’s and don’ts for real estate investors.
We’ll share with you what not to do when it comes to your investments, why it’s important to be thorough when scoping out a potential property, and more! Read on for the tips that will save beginner investors from making costly mistakes.
1. Do – your research and know the market
There is really only one strategy that’s going to give you the best results. While you can go into real estate head first and learn through mistakes, you’ll save yourself a lot of headaches and wasted time and money by doing your research first.
Once you get to know your market, your neighborhoods, even down to the streets, you’ll have a much easier time knowing which investments are worth putting your money into and which opportunities should send you running away.
Begin with a strong foundation: what types of properties do you want to seek? What process will you use to choose tenants? Will you re-sell or rent? How will you know when to leave an investment? You have to know more than just your end goal and how to begin. Even if you’re a new investor, it doesn’t mean you can’t do the research!
2. Don’t – be afraid to ask questions and learn from more experienced investors as a beginner investor
Having a plan set in place and doing proper research will help you get off to a great start. The next step after this is simply asking for help. There’s no shame in taking tips and advice from professionals who were once in your shoes. CLT Buyers even has a dedicated Thursday Office Hours, which you can attend to gain knowledge on anything under the real estate investing umbrella.
Talking with us can help you avoid common mistakes and road bumps early on. Check out our Facebook group here and get connected to join us in our next Office Hours!
Our first piece of advice we always like to give: think long term, not short term.
3. Do – Be as thorough as possible when thinking of making a purchase
Once you’ve finally found a property that you think checks all of the boxes, do your full due diligence. What’s the history of the house? Have you visited it in both the day and the night? Will it be vacant on closing day? Throughout our experience as professional home buyers, we’ve dealt with some pretty crazy scenarios that we would love everyone getting into this industry to be prepared for.
While not every bump in the road can be anticipated, it’s important to make sure you know exactly what you’re getting into when purchasing a property. Make sure to pay for the relevant inspections ASAP, especially because some of these fees will even be tax-deductible in the next fiscal year.
4. Don’t – take cash flow management lightly
There are a lot of costs that come with real estate investment as it is a risky business, so don’t forget to account for those. If you do your planning well and ahead of time, you may be able to predict most costs, but there may be unexpected costs. These scenarios can include finding out there will be more maintenance needed than expected, or there are extra fees involved at closing.
Because of this, you need to understand and manage your finances to be prepared for any shortfall. A good rule of thumb to follow is underestimating your expected income and overestimating your expenses. Having a clear budget will get you far, especially if you have multiple properties.
5. Do – Consider all factors when deciding to create a rental property or sell
If you decide to go into real estate investing and don’t sell your investment property right away, you can always rent it out. Having rental properties is an amazing way to keep steady cash flow in and generate passive income.
Depending on the property type especially, this may be the best option. For example, if it’s a rental property in a popular Florida beach community, you’ll always have a steady flow of income. This is a vacation rental.
However, if you have rental properties in a sleepy, snowy Vermont village, maybe it’s best to fix and flip your investment property and put it up for sale in the local market. This will allow you to purchase property you think has good potential and create a more stable investment. This is a good example of a residential property.
Real estate investing requires a strong investment strategy that should depend on many factors. Have a clear idea about who is in the area, the highs and lows of the investment properties, and so on. Your rental property may be far away and you may need a property manager. That might be out of your budget.
There are many factors at play when it comes to making money in this industry, even for beginner investors. With a rental property or a traditional home sale, the most important part is strong financial planning to build wealth.
6. Do – give importance to marketing and branding efforts
Yes, beginner investors can gather clients and prospects through word of mouth, but you can reach a much larger target market through the use of social media. Building and establishing an image as a business is extremely important. Showing that you are a professional investor and have knowledge of the industry will help you grow exponentially.
We really do think of the world as our oyster, and you should too. Don’t limit your strategies! It would serve any investor to expand their client base as much as possible. Real estate investors who build relationships with tenants, lenders, and landlords within your area, and possibly even in their state know the key to a successful outcome. In short, having strong social skills will allow you to more easily expand your investment reach.
If you’re feeling a little unsure about the wholesale real estate investment sector, we hope these tips have gotten you acquainted. Here’s our recap: first off, make sure that before you dive headfirst into this industry, do your research. Make sure to use resources around you, connect with other professionals, social media, books, etc., you have the knowledge at your fingertips to be successful if you do the work. Be careful with your cash and don’t shy away from social media branding! These tips should get you started, and if you’re interested in learning more about what it means to be a real estate investor, becoming a lending partner, or just want to hear more from us, don’t hesitate to reach out. We’d love to talk about long-term goals with you.