If you’re looking for a way to achieve financial freedom this year, then you’re in the right place. Real estate investing can be a great way to build wealth and create passive income streams! However, real estate is a massive industry, and getting started can seem overwhelming and confusing at the start, especially if you don’t have any experience buying homes.
To help, we’ve prepared this guide to show you how to get started in real estate. It will give you a better understanding of how the industry works, the mindset you need to succeed, and the general skills you’ll need to go from a new investor to an experienced real estate entrepreneur.
Real estate investing for beginners
Before you start generating leads and bidding on properties, it’s important to understand the basic concept that real estate investing is built on. In short, your goal is to buy properties at a discount and then sell them, rent them, or assign the contract to a cash buyer for a profit.
There are several different ways you can do this. They include:
- Wholesaling – Signing contracts with sellers and then assigning those contracts to buyers
- Fix and flipping – Buying, renovating, and selling homes for a profit
- Rental properties – Buying residential real estate and setting it up as a short-term (e.g. Airbnb, VRBO, etc.) or long-term rental
None of these strategies are mutually exclusive, but they all focus on slightly different types of real estate investments. If you’re wholesaling, you’ll probably focus on single-family homes owned by motivated sellers, which are people who need to sell for financial reasons. If you’re fix and flipping, most of your investments will be older houses or properties that have experienced damage or neglect. Finally, if you’re building a short-term or long-term rental portfolio, you may focus on a combination of these property types. Ideally, you’ll look for houses or commercial properties that don’t need much work so you can start renting them as quickly as possible.
Now that you understand the basics of the real estate industry and the options available to you, you should start learning more about the strategy you want to pursue. Each strategy relies on a unique set of knowledge and skills, so you should devote time to studying and exploring everything you can.
Real estate knowledge
Start by diving into the process behind the investing strategy you choose. For example, if you want to wholesale real estate, you should understand the steps in the process, the variations like wholetailing and reverse wholesaling, and what makes the method profitable.
Then you should educate yourself on the local and state laws regarding real estate investing in your market. In general, real estate investing is legal, but some states have stricter laws than others. You can find general guides online, but if you have specific questions, it’s always best to consult a real estate attorney before you take action.
Developing essential real estate skills
Real estate is a skill-based industry, so there are several abilities you’ll need to develop. The best way to develop these skills is to practice them over time, so if you find that you’re lacking in one of the following areas, taking consistent action is by far the best way to improve.
When you’re convincing someone to sell their house for below market value, you’ll need some sharp sales skills. However, that doesn’t mean you need to be a master at smooth talking and persuasion. Instead, you need to become a good listener and learn how to build rapport with property owners, identify their pain points or struggles, and work with them to develop a solution. In real estate investing, that solution is usually a cash offer on their property.
Cold calling is as much a part of real estate investing as buying houses is. So you’ll need to get comfortable on the phone and learn how to have compelling conversations. You’ll also need to stay on top of the ever-evolving world of calling regulations and best practices.
Comping and understanding an investment property’s value
Finally, you can’t make a profit if you buy without knowing what a property is worth. Doing so is the fastest way to lose a lot of money in real estate. So one of the most important skill sets you can develop is your ability to calculate a property’s value. There are several tools that will simplify the process, but understanding how the process works is essential to success.
Learning how to become a real estate investor may seem overwhelming, but there are countless resources you can leverage to learn everything you need to know. Getting started and making mistakes are also some of the best ways to learn about the industry. As long as you understand the basics and the laws around buying properties, your mistakes will be the best teachers you can find.
Build your network
Real estate is a business built on relationships, so no matter what kind of investing you plan on doing, your network will be invaluable. There are two pieces of your network that you should focus on: the one that helps you get deals and the one that helps you sell them.
To get deals, you should build relationships with as many different kinds of real estate professionals as possible. Get to know real estate agents, lenders, landscapers, roofers, real estate lawyers, property managers, and title professionals. These individuals will know about opportunities in your market, and they can also introduce you to sellers in many instances.
These relationships will also come in handy as you grow your business. For starters, you’ll likely need a host of services for your own properties, whether you’re rehabbing them or simply cleaning them up before showing them to buyers. You may also be able to leverage your network to help sellers and make the moving process easier for them.
While you’re establishing your network of real estate professionals, you should also form meaningful relationships with other investors. Building a healthy cash buyers list is essential, especially when you’re wholesaling, but being on good terms with other investors will open up even more opportunities. For example, if you have a healthy buyers list, you may be able to find deals without generating any leads; you can simply connect other investors with the right buyers and collect a portion of the assignment fee in return.
While you’re working on each of the previous steps, it’s important that you gain experience in the industry. The best way to get started is to generate leads, make offers, and then constantly improve your workflow.
If you have the money, you can invest in a mentorship program, which will jumpstart your networking process and give you exclusive coaching from well-established investors. However, these programs can be expensive and they aren’t required to get started. The only real prerequisite for success in real estate is a willingness to make mistakes and learn from them.
Just because you need to start investing to gain experience, that doesn’t mean you need to take big risks. Starting small and gradually building your portfolio is a good way to build a sustainable business. It allows you to learn safely and gain an understanding of the market without risking all of your money.
Becoming a real estate investor may seem like a lofty, unattainable goal, but it’s actually easier than it seems. If you want to invest in real estate, all you have to do is follow the steps in this guide. That may seem deceptively simple, but the good news is that real estate is more accessible today than it has ever been.
The economy may be uncertain, interest rates may be high, and property prices may be inflated, but there’s never an end to the opportunities available when you invest in real estate. In fact, the uncertainty of the world around us is precisely why you should take this opportunity to become a real estate investor. People will always need places to live and work, so if you can build a cash flow asset or find a way to make money on property investing, you’ll be well prepared to ride whatever wave the economy sends your way.
The best part is that you don’t need a real estate license, access to the multiple listings service, or a large real estate investment trust to get started. All you need is some grit, a willingness to learn, and a way to find opportunities. Those three things will help you create the success you’re looking for.