Here are the top real estate investing tips for beginners directly from an experienced investor who has done this. Strap on your training wheels, read this article, and start investing today. When I was a beginning real estate investor, very little accessible information was available on the topic. I spent well over ten years buying courses, wasting money, and never making an investment. Despite all my stalling, when I finally started, I made many mistakes and received almost no value from studying. However, I treated each mistake as a lesson and continued forward. Over 15 years later, I have over 65 rental houses, regularly flip houses, and make other real estate investments. The Real Estate Adventurer site aims to show everyone how to become successful with real estate investing. This article will explore the ten most important tips a new real estate investor needs.
1. Don’t Pay Too Much
Of all the real estate investing tips for beginners or pros, the most important one has to be: Never Pay Too Much for the property. As an investor, you aim to purchase properties at less than market value. This gives you instant equity and multiples the growth resulting from possible market appreciation. Paying too much for property creates problems that last as long as you own the property and sometimes longer. I have had trivial issues because I spent a reasonable amount, but it would have been devastating if I had paid more for the property. So far, I have never bought a property and wish I could have spent more on it. Remember, it’s better to miss an opportunity than to overpay for investment real estate.
2. Stop Researching, and Start Investing
Many would-be investors experience analysis paralysis, which means they overthink a situation and cannot decide and move forward. Of course, it’s good to understand your local market and learn a few investing terms, but the research should stop there. As a beginning real estate investor, you don’t need to learn advanced techniques or creative financing ideas that will never work. Most of the information is vague, and a good portion is wrong. Find a suitable investment property, follow rule #1, and buy the property.
3. Don’t Pay for Advice
Do not take a course. Do not attend a seminar. Do not pay for advice. A vast industry around real estate investing has popped up, but there is nothing to learn here. This industry primarily exists to take advantage of beginning real estate investors. Learn to detect scams and avoid them at all costs. Being a real estate investor is pretty simple; buy real estate following rule #1.
4. You Don’t Need a Team Frist
Many so-called real estate investment gurus will encourage beginners to build a team before investing. This team would be your closing attorney, appraisers, accountants, and other people you will work with during your investing career. Sometimes, they even suggest you find someone to mentor you. This is a waste of time; none of these people want to be involved until you need them. Once you have a property, you can engage these people as their services are required.
5. Start with Single Family Rentals
Investing in single-family rentals is the best way for a beginner to enter the field of real estate investing. It’s easy to get loans for these properties, and there are myriad tax benefits. Investing in a rental house is not a speculative venture that relies on outside factors. It’s a proven business model, and everyone needs a place to live. As always, follow rule #1 when buying the house, and never pay too much for a rental house.
6. Learn the Eviction Process
Once you have a rental house, it’s time to study. Collecting rent is essential; if tenants aren’t paying, they need to leave. The rules for the eviction process vary between cities, and you need to know the process in your area. You can usually read the rules online, but ensure you are learning the rules for your specific area. As a beginning real estate investor, you should go to court and watch a few evictions to know what to expect.
7. Collect the Rent
The tenant’s primary responsibility is to pay the rent, and you must ensure they are paying. You need to set a market rent, which is the rent of similar properties, and expect the tenants to pay on time. The further behind the tenant gets, the cheaper it is for them to move to another house. You should be ready to file for eviction as fast as you are allowed in your city. You can always stop the eviction if a tenant pays, but do not allow them to stretch it out any longer than you are required to.
8. Make Repairs Quickly
The landlord’s primary responsibility is to make repairs. It would be best if you made these repairs as quickly as possible. You will eventually have to make the repairs to get a new tenant, so you might as well make them fast and keep the tenants safe and happy. You should expect your expense, not including loan payments, to be about 40% of the rent. Many beginning real estate investors have problems handling the repairs, which is usually because they failed to follow rule number 1.
9. Cash flow, Cash flow, Cash flow
Cash flow is the money you have left after expenses and debt service. This is the essential part of managing the rental house, and you must ensure that your cash flow is adequate. Keep an eye on expenses, and make sure the rent is collected. Your cash flow enables you to make timely repairs and handle other payments as they arise. If you follow rule #1, you shouldn’t have a problem with cash flow.
If you can buy investment properties at the right price and effectively manage these properties, it’s time to scale. Start with buying more rental houses, but be ready to expand into other areas. Now is the time to consider multi-family properties and flipping houses. After you have mastered residential properties, you are prepared to venture into commercial real estate.
This article gives ten easy tips for the beginning real estate investor. It starts with the most critical factor, never paying too much for a property. It briefly covers the vital points of becoming a real estate investor and gives you an excellent foundation to launch your investing career. I have been investing in real estate for over 15 years and can attest that the tips above, combined with time, will give you a sound foundation in real estate investing.