Unlike stocks, real estate is much less volatile. In fact, an investor is unlikely to lose their capital in a real estate investment. Sure, the value of a property might sink, as was the case in the aftermath of the financial crisis of 2008, but give it enough time and it will rise again.
So, if you’re looking to invest in real estate, you’ve made a smart decision.
Here’s a real estate for beginners’ guide.
1. Learn About Real Estate Investing
To a newbie, investing might look as simple as putting down capital in a certain venture and waiting for returns. Nothing could be further from the truth.
To be a shrewd real estate investor, you must start by learning about the industry. What are the challenges investors face? What are the different types of real estate assets? What’s the average return on investment on each of these real estate assets?
With such information, you’ll start out on a solid footing. For example, gathering information about the types of real estate assets will enable you to determine whether to specialize in a specific asset or adopt a broader strategy.
2. Location Matters
Location is the biggest factor in real estate investing.
While every real estate investor would love to invest in prime locations around the country, most beginners typically narrow down to specific locations.
The question is: How do you find the best location to make a real estate investment?
Do extensive market research. This is the only way to identify ideal locations.
Ideally, you want to invest in locations where land or property prices are currently low, but with a strong appreciation promise. This is called the “buy low, sell high” strategy. This is the same strategy used by value investors in the stock market.
3. Get Your Finances In Order
Real estate is a capital-intensive investment. If all you have in your investment fund is a thousand bucks, you aren’t financially ready to be a real estate investor.
So, how much capital do you need as a real estate investing beginner?
Well, it depends on your strategy. If you plan to purchase properties, fix them up, and sell at a profit, you’ll need substantially more capital than, say, if your strategy is to invest in real estate investment trusts (REITs).
Regardless of your strategy, don’t start out unless you have adequate capital. If you’re unable to self-fund your investment, you can consider alternatives such as cash loans, mortgages, and crowdfunding (partnerships).
4. Build a Network of Industry Professionals
Real estate deals often involve lots of parties and paperwork. There are sellers, buyers, agents, valuers, and even lawyers involved in most transactions.
This is why a successful real estate investor must build a network of industry professionals.
If you’ll be buying and selling property, for instance, you must know how todetermine the value of a house, examine ownership titles, etc. You probably don’t have the skills to perform these tasks on your own, so ensure you have a list of specialists on your speed dial.
Embrace This Real Estate for Beginner’s Guide
As a rookie, investing in real estate might seem daunting, but it’s not rocket science. You just need three things: strategy, capital, and patience. And having read this real estate for beginners’ guide, you’re now in a strong position to make solid investments.
Keep reading our blog for more investing tips and insights.