Real Estate Investment Tips for New Investors
Real estate investment can be an exciting way to supplement one's income. If someone becomes a serious investor, they may even turn real estate investment into their full-time business. Getting started in the real estate investment world is not always easy, but the rewards can be great. In order to become a successful investor, people will need to have money for a down payment (and potentially other investors to partner with), a well-crafted investment plan, and a good real estate professional to help with the buying process. Below are some tips for becoming a successful real estate investor.
Types of Real Estate Investment
There are many types of real estate that investors can purchase, and knowing the different types of real estate investment can help investors decide which type is right for them. In general, real estate investment properties can be divided into two categories: commercial and residential.
Residential real estate investment can be divided into three different sub-categories: rental houses, multi-family homes, and fix-and-flip properties. Many first-time real estate investors start by purchasing a home they can rent to tenants.
Residential rental property is a preferred form of real estate investment for beginners because rental homes tend to be more affordable and easier to maintain. Multi-family homes require a greater up-front investment, but can also be more lucrative. Finally, fix-and-flip properties can be lucrative for someone who has the right home improvement skills.
Commercial real estate investment usually requires more money up front, because the buildings tend to be more costly than residential properties. Different types of commercial real estate investment include office space, retail space, and industrial property (like warehouses and factories). When trying to decide what kind of property to invest in, it's important to consider cost versus potential return, demand for the type of space being purchased, and local and national economy.
When trying to decide what type of real estate to invest in, potential investors should do their research to find out:
- 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 in the area where they would like to purchase?
Align With an Agent
Before becoming a real estate investor, it's important for beginners to align themselves with a knowledgeable real estate agent. A good real estate professional can help investors evaluate properties, navigate the real estate purchase process, and negotiate a good price for the real estate they would like to buy.
To choose the right real estate professional, investors should 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?
Make a Plan
Before a real estate investor can get started with the purchase of their first property, they should outline a plan with 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 profit off ownership of the property?
- How will I fix up or maintain the property?
Real estate investment can become a successful business. In addition to working with a real estate professional, investors should be ready with a plan and have knowledge about the area where they're hoping to buy property.