Five Next Steps for the First-Time Real Estate Investor

Written by Posted On Tuesday, 09 October 2018 17:46

The overarching aim with any investment strategy is to put your money to work today so that later down the road, you can reap the benefits later. This holds just as true for Wall Street savants as it does for newbie real estate investors.


Yet, as with any investment, real estate can pose some up-front risks. Unless you account for those in your approach, you could end up regretting the venture as soon as it begins. The good news is that most of these potholes are easily avoidable if you know where to look and who to talk to along the way. Ultimately, you want to ensure that the gains you receive are enough to cover any expenses you pay out, including the initial cost of the property itself as well as any taxes, maintenance and routine upkeep you’re required to cover.


Today, we’re taking a look at a few ways first-time real estate investors can set themselves up for success. Though it can be a challenging pursuit, it is also a valuable one when done correctly. Let’s get started.


1. Pick a niche.

Maybe you watched someone on television wax poetic on the perks of real estate investing. Or, maybe you know someone who’s made a significant income this way and you’re ready to jump in, full-throttle. While it can be exciting to think of the possibilities, you’ll be better served by considering exactly what you want to get out of this journey.


Do you want to own and manage several rental properties? Do you want to invest in fixer-uppers and flip them for a profit? There are several avenues through which you can earn an income through real estate, but unless you know the strategy you want to take, you could wind up with more questions than dollars. Do your homework, take your time and talk to your trusted financial advisor before signing on any dotted lines.


2. Follow the news.

As with any investment approach, it’s important to stay up-to-date on the news, trends and patterns defining the real estate investment industry. The good news is that today’s investor has immediate access to more news sources than ever before. From mobile apps to e-newsletters and podcasts, you can spend your days soaking up all the knowledge you want around your specific niche.


Of course, you don’t have to inundate yourself with information, but it’s helpful to know where the market is heading, what experts are recommending, and if certain regulations or tax laws have changed. For instance, though the 1031 exchange tax deferment benefit was recently nixed under the federal Tax Cuts and Jobs Act, the change only applied to personal property. Congress actually retained the benefit when it concerns real property, which means you can stand to reap this benefit by investing smartly. So, learn to love studying and reading about the industry and the data you absorb can help you steer your investments strategically.


3. Learn from those who have been there.

Are there local investors in your area who are succeeding in your specific niche? If so, don’t hesitate to connect with them. All of the online surfing in the world won’t prove as valuable as sitting down with a mentor over a cup of coffee and learning about some of his or her properties. You can also ask questions around what works in the area, which types of real estate are the most popular and profitable and how to navigate any challenges that may crop up.


This one-on-one time can be incredibly valuable, but remember to keep it professional. Spamming someone with requests or inquiries can quickly grow tiresome and work against you.


4. Learn to budget your personal finances.

While you’re still building your wealth, most of the money you need to fund your real estate investments will likely come from your own pocket. To this end, it’s important to be as frugal with your money as possible, especially in the beginning. Planning to take a long, expensive vacation? Consider if that money could be better spent as a down payment on a property you have your eye on.


Going out every weekend and shelling out tons of cash on dining and entertainment? While you don’t have to drastically scale back your lifestyle, you may need to start saving most of that spare cash in a rainy day fund for property repairs and upgrades.


5. Start small.

You might be tempted to go out an invest in a megaplex apartment right off the bat, especially if you have access to a substantial sum of cash. Yet, you don’t need to bite off more than you can chew. Usually, your first real estate investment will happen when you get the keys to your first home. Take this time to learn how to do DIY repairs yourself, invest your time, money and resources into a property and care for it as your own. This can be some of the most valuable homework you do, so don’t be afraid to start small and work your way up from there.


Real Estate Investing for the Future

As you take the next steps in your real estate investment journey, do so with caution and care. Reach out to others who know more than you and learn from their experiences. Calculate how much money you’ll need, what yields you can expect to gain and how much you’ll need to keep on hand for the future.


Talk directly with your financial planner to determine which routes are ideal for your long-term investment portfolio. Then, once you’re ready, you can work toward securing your first property. Until then, plan, dream and study as much as possible. The return will be well worth it in the end.

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