For some, the dream is to hold down a full-time job while investing on the side and pulling in extra income. For others, they want to dive headfirst into real estate investment and become their own boss. While the appeal is certainly there, it can take time to find financial stability and feel comfortable in the work being tackled. There’s much homework to be done before and during an investment project, and just when you think it’s over, you dive right back into another prospect.
Though challenging, the work itself is rewarding and if you’re serious enough about the industry to find your footing and build a strong foundation for your future, the opportunities for your portfolio’s expansion can be endless. If this sounds like the route you’re ready to take, here are the five ways to get started.
Determine an investment strategy and stick with it
There are two major paths when considering the kind of real estate investment you want to pursue: active or passive. For those looking to fix-and-flip, wholesale, or manage rentals themselves, this would be categorized as active real estate investing. It’s not uncommon for active investors to also double up as licensed real estate agents, earning commission while developing their portfolio.
Those who want to invest for recurring cash-flow streams and long-term property appreciation are the passive real estate investors. Passive investing often involves purchasing professionally managed rental properties or partnering with other another investor to go in on a property. While there is some work involved, the day-to-day tasks of running a rental property is handled by a property manager.
Know the industry and sharpen your skills
The best way to learn is to do and by experiencing things firsthand in the industry, you’ll learn about the good and the bad quickly enough. The most successful investors are always plugged in, always networking, always researching. In short, always learning. Understanding not just the industry itself but also the market you’re investing in is paramount to finding success as an investor.
Speaking of the market…
Understand your region
Part of having a successful investment project is knowing you found yourself a good deal from the very beginning, but it’s impossible to know whether you put your money in a sound investment if you’re unsure of the market. Understanding things like fair property values (as well as how they’re trending), market rents and the true income potential of a property, as well as whether it will be cash-flow positive are all signs to follow when deciding to buy an investment.
It's not just about the numbers—know local real estate laws
It’s impossible to completely bypass legal situations when renting a property out to the general public. The odds won’t always be in your favor as an investor, and when those moments arise, it’s important to have a firm grasp of local real estate laws and rules to avoid potential problems. A few laws worth knowing well, particularly if you are investing in a fix-and-hold property?
Eviction process: These aren’t a standard one-size-fits-all—laws around eviction vary from place to place. If you go down the path of being a landlord, know how these laws impact both you and your tenants.
Conducting background checks: Knowing the laws around how to vet prospective tenants—and knowing to treat everyone fairly and equally—is another critical piece of information all landlords should be very familiar with.
Insurance coverage: Insurance coverage for owner-occupied homes differ from that of rental properties. All landlords should be familiar with general liability coverage that protects against claims from tenants or their guests.
Treat the work like work…not a hobby
Of course, all investors have different reasons—and goals!—for entering the industry, but if your goal is to become financially stable and secure your retirement down the line, then you should approach investing like a real job instead of a hobby. Working on a feasible business plan with achievable goals, budgets, and a strategy in place is the first step to get you on the right path. Choose an investment plan that fulfills both short- and long-term goals and develop a network of knowledgeable professionals—vendors, business partners, clients, as well as other investors.
If you are ready to start your full-time real estate investment journey, contact us today.