So you want to start investing in real estate?

You’ve been told by friends and family that it’s a great way to passively make money overtime and is, for the most part, a predictable source of cash flow. While there are many different types of real estate investment (commercial, retail, industrial), this post will focus on residential real estate. Here are 5 real estate investing tip for beginners!

Tip #1: Do your homework.

Cash flow is not the only way investors make an income. Do the research to understand the different ways you will make money as an investor, such as real estate appreciation (i.e. increase in the property over time) and ancillary real estate investment income (i.e. extra revenue generated from tenants who pay for the parking garage, or the laundry machines).

Other things to research are the tax benefits in the area you are investing in, as well as becoming familiar with known terms like “the low pay down.” If this all seems a tad overwhelming, that’s normal! Find books and courses on the subject of real estate investing so you stay ahead of the curve.

Tip #2: Check your credit score.

Investing in real estate usually requires borrowing money. A good credit score will help make sure you get a fast return on your investment. Investing in real estate can be a very effective way to grow wealth, but you need to have a good financial baseline to get started.

Tip #3: Don’t get greedy.

Start your real estate investment in a stable market that is inexpensive. For many, their first time investing means their capital is not as high to afford the high entry costs of an expensive neighborhood. Resort to low-cost cities to get your grounding and grow experience in the world of investing.

Tip #4: Invest in your area.

Is your neighborhood relatively inexpensive and stable? Invest there first! And if it is not, find a neighborhood no further than 45 minutes from you as it will help in the long run.

By investing in your area, it will allow you to handle the investment without having to drive (or fly) miles and miles if you are needed at the residence. If you are investing in an apartment, it is also a good idea to consider investing in properties that are in your building. You already know the way the building works and will help save money and time as you begin to manage your first investment.

Tip #5: Seek guidance from an experienced realtor.

While you have the drive to invest, a real estate agent has the information you need — agents have access to the MLS, Multiple Listing Service, and can help guide you towards listed foreclosures that you could invest in. A real estate agent also has an arsenal of knowledge about the industry that will come in handy when you are preparing for your first investment. Seek out a real estate agent who has experience in the business and has made profits in investing.

Ready to start investing? I would be happy to jump on a call to discuss your options and help guide you in the right direction as you embark on real estate investing. Good luck!