Real Estate Investment Tips for New Investors

Looking to make some extra cash? Real estate investing can be an exciting way to supplement your income. Some even become serious investors,  turning real estate investing into their full-time business. Getting started in the real estate investment world is not always easy. People need to have money for a down payment, a well-crafted investment plan, potential investment partners, and an excellent real estate professional to help with the buying process. Below are some real estate investing tips to start the path toward becoming a successful real estate investor.

For informational purposes only. Always consult with a licensed real estate professional before proceeding with any real estate transaction.

Types of Real Estate Investment

Investors can purchase many types of real estate. Broadly speaking, real estate investment properties fall into two categories: commercial and residential. Knowing the differences between these real estate investment categories can help investors decide which is right for them. 

Residential real estate investment is further divided into three sub-categories: rental houses, multi-family homes, and fix-and-flip properties.

Buying a rental property is a preferred form of real estate investment for beginners because buying rental homes is similar to buying a primary residence. They’re usually easier to maintain, and since you’re typically dealing with a single tenant, it’s easier to learn the ropes of being a landlord. Multi-family homes require a more significant up-front financial investment. That also means ownership can be more lucrative because of the larger income stream and appreciation gains. Finally, fix-and-flip properties can be lucrative for someone with the right home improvement skills and patience to find underpriced properties with potential.

On the commercial side of the market, there is greater variety in the type of real estate investing. Investors can specialize in office space, retail space, and industrial property (like warehouses and factories). When deciding what kind of property to invest in, it’s essential to consider cost versus potential return, demand for the type of space being purchased, and the local and national economy.

Commercial real estate investment usually requires more money upfront because buildings are more costly than residential properties. Pricing requires factoring in the property’s potential revenue and its expenses. It also means a higher vacancy risk, which would require its owner to float the costs like utilities and mortgage payments while marketing to attract tenants.

When trying to decide what type of real estate to invest in, potential investors should ask:

• What kind of real estate is in the greatest demand where they want to buy?
• What kind of real estate investment matches their skills?
• What is the economy like where they would like to purchase?

Align With an Agent

Before becoming a real estate investor, beginners should align themselves with a knowledgeable real estate agent. Think about what these individuals already know: where buyers are looking, where properties are affordably priced, where homes are appreciating… A good real estate professional can give new real estate investors tips to evaluate properties, conduct due diligence, negotiate a good price, and navigate the real estate purchase process.

To choose the right real estate professional, start by interviewing agents. It helps to ask questions such as:

• How long have you been in the business?
• Do you have an area of expertise?
• Do you have references?
• How long have you been facilitating real estate purchases in this area?
• Have you worked with investors before?

Make a Plan

Before purchasing the first property, new real estate investors need a business plan. This document answers questions such as:

• How much of my own money will I invest in real estate?
• Will I be getting a loan?
• Do I need to partner with other investors?
• What kind of property will I buy?
• Is the goal to sell the property for a profit or make a profit off ownership of the property?
• How will I fix up or maintain the property?

Real estate investing can become a successful business with knowledge, hard work, and experience. Working with a mentor or partnering with a real estate professional is helpful because they’ll have answers to your starting questions. They may know the area where you’re hoping to buy a property and can give pointers as you begin. As always, have a set plan with your goals and contributions outlined.

For informational purposes only. Always consult with a licensed real estate professional before proceeding with any real estate transaction.

Updated March 2024