Investing for Beginners

Investing in real estate is one of the best ways to build wealth if it is done responsibly and in the right way. Most people who are new to real estate investing are either clueless or confused about the process. This is because there are hundreds of books, multiple late night infomercials, thousands of online courses and websites, all of which tend to overwhelm potential investors. While the topic is too vast to cover in a blog post, we will highlight the basics.

Before deciding to become an investor, it is best to understand the pros and cons, risks involved, skills required, investment methods and types. The potential investor should have buying and selling knowledge, understand tax implications, and possess knowledge of all strategies. Doing all this homework is a good starting point because it will give you a very thorough insight of the various aspects of investing, and the amount of money and time you may require. This will help you determine if you really want to become a real estate investor.

Once you have decided firmly to become a landlord, flip property, or even buy your first home, it is probably a good idea to attend a few classes about real estate investment at your local community college. You can also acquire basic knowledge by purchasing books that objectively teach the subject. Another great way to learn quickly is to have a mentor, or by teaming up with an experienced firm or investor who is willing to teach you the basics.  We would be delighted to have an opportunity to teach you the things you need to know.

If you are learning on your own, understand the required skills. Start with the financials. You must learn how mortgages work. You must understand how to read financial numbers on a deal. You need to know how to calculate property values and about the different types of property insurance. Determination of the value of a property is dependent on your knowledge of different types of appraisal methods. Just like any home, your investment property will also require repairs and maintenance. It is therefore essential to learn the basics of plumbing, wiring, roofs, sidings, and other aspects of the home. You are not expected to know all these in detail, but developing a general knowledge of all these will help.

Investing involves many new words, definitions, acronyms, and abbreviations. It is imperative that you become very familiar with investment jargon. The only way you can become a successful real estate investor is by buying low and selling high. This is why you must know how to value properties. You must decide which neighborhoods you want to invest in. This involves learning about schooling districts, local amenities, property taxes in the area, etc.

Real estate investment is similar to a team sport. Even with all the knowledge you have acquired, to become successful you will always need the help of many people with specific expertise. You must start looking for a real estate agent, an accountant, an appraiser, a mortgage loan officer, a bank, an insurance agent, a property manager and a handyman or two. Having this network of people will help you in the short and long term.

You must decide which of the two investment strategies are right for you – flipping or holding. Flipping is a short-term investment strategy, where you buy a slightly outdated or beat up house, fix it up cost effectively and then sell it for a profit. This will work only if you have the stomach to take some risks, as it would require you to put some upfront cash for repairs. You must also know enough about repairs because some of them tend to be major. The second investment method is buying and holding. In this case you buy a property and rent it out for the long term. This strategy brings the responsibilities of managing tenants and maintaining properties. You use the rent money to pay for the mortgage and build equity, which in the long run can garner substantial money depending on market conditions.

It is also important to remember that real estate investing involves risks just like any other investment. You may end upbuying a house that requires more costly repairs than you originally estimated. The housing market may slow down, which turn your investment upside down, meaning you owe more than the value of the property. You must also have the ability and willingness to evict tenants if they do not make payments. Investing in real estate is one of the best ways to build wealth. It is not for everyone, but if it is donecorrectly, it is one of the best ways to achieve financial freedom.