So you're ready to buy a rental property? So you're ready to buy an investment property? Well, where do you start and how do you invest in real estate? First off, set some goals and put a real estate investing plan together.
It’s very difficult to gain the right kind of experience if you don’t know what your goals are. Whenever you pursue any type of investing strategy, it’s important to have goals so you can plan accordingly. This will help you figure out the best way to start your real estate investment career since there are several ways you can invest in real estate.
For example, you have to decide how quickly or slowly you want to make money, and how much difficulty you can deal with in the meantime. Yes, the main goal is to make money via an income generating property, either with cash flow from rent or through an increase in the overall value of the property. And, hopefully through both those ways.
What kind of investment property appeals to you? How much can you handle? The list can go on forever. To get a better idea of what you can do, take a look at a few of the most common ways to invest in real estate:
- Wholesale - fast earnings, low risk, high difficulty (wholesale investing is buying properties and selling them right away, usually without fixing them up - requires a network of potential buyers/investors)
- Rehabbing - reasonably fast earnings, medium-to-high risk, medium-to-high difficulty
- Creative Investing - slow earnings, low-to-medium risk, medium difficulty (Buying property with partners so you take on less risk)
- Landlord - very slow earnings, low-to-medium risk, low-to-high difficulty (Buying a rental property and managing that property yourself)
- Flipping Houses - very difficult, there are usually unknown costs that arise but if you have a lot of experience in fixing up houses this might be right for you
You should also take into your consideration your personal tastes, because this will shape the type of strategy you employ in the long-run. If you love social interaction, then you might want to wholesale or do some creative investing. However, if you’re somewhat shy or just don’t like to interact much with people, you might choose rehabbing or buying rentals. Whatever you choose, though, do so on the basis of your personality type. It’s like buying shoes. You just don’t buy a pair that doesn’t fit your feet.
Aside from setting goals and choosing the type of properties to invest in, the next biggest step is buying your first property. But don’t rush it. Instead, take your time and be as attentive as possible because ultimately, this is a valuable learning experience. You’ll learn how to get your credit in shape, select a property, obtain a loan, find tenants, choose a property manager, and so many other crucial things that are integral to your future investments. So go slow now, absorb everything you can, and be patient. Your earnings depend on it.
This process might seem difficult at first but it will get much easier the more you do it. Remember the wisdom of Lao Tsu: “A journey of a thousand miles begins with a single step.” As time passes, you’ll pick up new knowledge here and there just by viewing properties, reading, and talking to people who are in the real estate investment industry.
Soon, these pieces of information will build on top of each other and eventually form a solid foundation that will guide you reliably and carefully. For example, you’ll be able make quick evaluations of properties, fix things swiftly, and then, as you buy and manage more properties, you might eventually be known as an expert in the field. And maybe you’ll earn a catchy nickname such as Rich Dad or Latin Dad.
Quick Suggestion: Take three months to go through the process of viewing, calling, talking, searching for potential investment properties, reading articles, scanning websites, and studying books. Then you can go after the rental property that best satisfies your analysis and interests. On the other hand, don’t fall victim to “paralysis by analysis.” If you spend too much time thinking about what you should do, you might never end up actually doing it.
After you read some of the articles on our site, you’ll be more conscious of what’s going on in the real estate market. For example, when you drive by a house with a “For Sale” sign staked in the front yard, you’ll look at that piece of property a lot differently than you ever did. You might wonder, “What could I do to increase that house’s value?” Or, if you glance through your local paper, or a friend mentions a specific real estate bargain, you’ll know exactly what’s going on and just how good that opportunity might be. Who knows? It could be that elusive diamond in the rough!