Many times, people are nervous about becoming real estate investment beginners because of the amount of money that is involved – and the degree of risk they are assuming. A lot of the time, they hear about real estate investing through slick radio ads that sound like the same hucksters selling snake oil or other tonics, and they decide to invest elsewhere.
One reason why HOS Financial opened up our doors was to help real estate investments beginners find their way to properties that make sense and (when applicable) mortgages that offer the best deal in terms of rate and term. Let’s take a look at some of the most common tips that we provide to those who are new to investing in real estate as a form of long-term financial security.
In Real estate investing you don’t have to be an expert to start.
There is a ton of information out there about real estate investing. There are all kinds of niches and strategies that people use to make money. However, you don’t have to know about every strategy to start. It might be that one strategy is more suited to your current financial situation than another. This is where HOS Financial stands ready to help real estate investment beginners by going over your goals and connecting you with opportunities that will help you grow your portfolio.
You MUST do your research and homework.
There are some “fixer-uppers” that can turn into gold mines. There are other “fixer-uppers” that turn into absolute money pits. When words such as “black mold” and “termites” come back, you know to run in the opposite direction. This is when forming a good relationship with a home inspection company that produces thorough and reliable results is a sound idea. HOS Financial has relationships with a number of reputable home inspection companies throughout different regions in Canada. It’s worth getting a thorough inspection up front to save money down the road.
Talk to some other investors in your niche.
Investing in real estate is not a secret science, and many people who have had some success enjoy talking about their success stories with other people. This doesn’t mean that you should deluge their inboxes or their Facebook pages with random requests for help. Instead, go to local events for real estate investors and build a network with the people you meet there. Over a few cocktails, you will find that successful investors are glad to share their winning strategies with you.
Be ready to sacrifice – at first.
There are some people who do not think they have the money to invest in real estate. It’s true that few people have $400,000 sitting around to fund a private mortgage. Instead, they start by buying into funds that sell mortgage-backed securities at much smaller dollar amounts and then reinvesting the returns that come in each month, quarter and year. It also means investing more than you think you can. You don’t want to jeopardize your personal savings, but if you can find ways to trim your expenses each month and add to what you are investing, you are going to have a larger pile of money to put to work in the mortgage market – which means you will have more principal bringing you in interest each month.
Remember the principles of basic math.
If you invest in rental properties but don’t figure in any money for upkeep, you are going to see your profits go down the drain quickly. Tenants tend to be less careful with the places where they live than homeowners – after all, they’re not the ones having to make repairs. Talk to your realtor about a recommended percentage for upkeep savings in the area in which you are buying properties as an investor. There are also things such as deductibles (in the case of roof damage or other catastrophic issues) that you need to set aside. If you haven’t done this, you are walking on thin ice financially.
Real Estate Investment Advice for Beginners (Cont’)
It’s easy to stress out when you are new at the real estate investing game. The dollar amounts can seem large, and finding the right property for your investment needs won’t always happen overnight. Here are some ideas to help you get into the market without overloading on pressure.
What’s the best way to get into real estate investing?
Some pursuits are competitive. Real estate investing is not. There are plenty of properties out there, and there is plenty of money for everyone. Go to a local real estate investing club and talk to people who have made a good bit of money and are ready to share their success stories. One thing you’ll learn about successful people is that they are often generous with advice – because they received help themselves starting out – or perhaps because they realize that a large network of goodwill works both ways, and that you’re more likely to pass along helpful tips to them when you get them.
Remember, though – don’t just listen to someone without considering what they have to say critically. You may have different access to resources, or you may be looking at a different real estate market. Do your research so that your investment strategy ends up optimally for you.
Where can I get real estate investment tips for beginners?
In addition to local clubs, another growing source of advice is the wealth of podcasts out there. Several companies have put together podcasts about how to put together a real estate investment portfolio, and the more information you gather, the better off you will be.
It’s important to remember that you don’t have to know everything about the market before you start investing. If you’re looking for quick flips, then you’ll pursue a specific strategy. If you want to build a collection of traditional rental properties, then your strategy will be different. Looking into rent to own properties for your investments? Then you’ll be looking at a third way. The key is not to let yourself get overwhelmed and stay focused on what is important to you.
Can you really get real estate investment strategies for beginners from veterans in the market?
It’s a solid point that people who got into the market 30 years ago had a different experience than what you are about to have. However, there are many principles that remain unchanged: the importance of a solid network, the basics of staging, the best things to look for in a potential tenant (or borrower/tenant). The technology is different, but the truths about real estate are much more permanent.
I’ve heard a lot about easy real estate investing. Is this true?
You only get out of real estate investing what you are willing to put into it. Write down your business plan so that you keep sight of your goals. Think about goals 30, 60 and 90 days from now, and then a year from now. Then plan out five years, and then ten years. This gives you a set of incremental steps to take. It might not seem easy now to build a collection of properties, or to set up a steady revenue stream from your real estate investments. Following your plans one step at a time will make it seem much easier, because you’ll have less to bite off with each step.
How much money do you need to start real estate investing?
That will depend on the number of partners you have coming along with you and the scale at which you want to invest. You don’t need to be a millionaire, though, by any stretch of the imagination. Most newbies at the real estate game started out just as modestly as you are.
What’s the BEST real estate investment advice for beginners?
Treat it like a job. It might be your path out of a 9-to-5 existence, but the truth is that you’ll spend a lot of time managing your investments, whether it’s looking for that next project or putting some sweat equity into one of your earlier properties to save on your margins. The more effort and focus you put into your real estate investments, the better your returns will be – because this will have your passion and your purpose in it.
Real estate investments beginners will love!
These are just some bits of advice that we at HOS Financial give to real estate investment beginners. Reach out to one of our experts if you think you are ready to enter this market!