Real Estate Investing Strategies for Beginners

Real estate investments are often recommended as a smart addition to a portfolio, but it can be a hurdle for beginners to get started in the world of real estate. There are some key principles every investor should know, along with a decent amount of capital needed to secure an investment. Plus, certain strategies may be better suited to investors that are just starting out. However, investors should know that they aren’t alone; utilizing resources for due diligence can help them better position themselves to find success.

In this piece, we’ll cover the key strategies investors can use to break into the world of real estate investing, as well as some common mistakes beginners should be careful to avoid.

Why Real Estate is Ideal for Beginners

Let’s start by going over what makes real estate such a great investment to get into. Real estate properties are tangible assets which have a common use case, which helps keeps them in high demand. This makes real estate a more stable investment than things like stocks, and it tends to keep up with or even exceed the rate of inflation. Real estate offers cash flow in the form of rental income, and can also appreciate over time to further increase an investor’s returns. Additionally, real estate offers several tax benefits like deductions and depreciation to reduce the taxable income an investor receives from it.

Key Principles Every Beginner Should Know

We also want to cover some of the most crucial principles investors should understand before diving into real estate:

• First is the importance of due diligence, especially with understanding the location you’re planning to invest in, as well as market trends and the demographics that make it up. These factors can all have an impact on an investment’s success because they all directly affect demand for a property. Understanding your target market also helps you market better to that audience.
• It is equally important to have a clear plan and exit strategy for an investment, whether it’s holding on to it for rental income, or flipping the property to take in returns. It can also be a good idea to have a contingency, in case the first strategy doesn’t work out as planned.
• Investors should have a good understanding of their finances with regard to the investment. Budgeting is a crucial step of the process, as well as securing financing from a lender. A good credit score is not always necessary for obtaining a loan, but it may help you secure better terms.
• Additionally, there is some real estate jargon investors should get familiar with. ROI is short for Return on Investment, while NOI stands for Net Operating Income. Cash flow, equity, and cap rate are also terms investors should take time to understand.

Strategies for Beginners to Get Started

For beginner investors, it’s often better to choose strategies that will help them get familiar with real estate without getting overwhelmed. It may be better to start small with a single-family home or duplex if you plan to invest in rental property, for example. A home flip can also be a good first investment, since it gets investors familiar with each step of the real estate process, and it can provide a strong return to reinvest in other projects. For an even more hands off approach, consider investing in REITs which are offered by companies seeking capital for large investment projects. It can even be good to partner with an experienced investor, or work with a lender that operates in the real estate space, as they may have additional tips or be able to provide resources to help you with your investment.

Common Mistakes Beginner Should Avoid

Real estate investing isn’t always sunshine and rainbows; each of these projects takes real capital and should be treated with a certain level of respect. It can be easy to make mistakes that jeopardize the profitability of your investment, especially if you don’t take time to properly plan your project. One of the most common mistakes beginners make is overestimating their returns, making them dive into projects that turn out to be bad investments. In a similar vein, underestimating the project’s total costs can end up diminishing your return. That’s why it’s so important to dedicate an appropriate amount of time to due diligence with these investments. Do not make investment decisions based on emotions, make sure that the numbers and research are there to back up your choices.

Tools and Resources for Success

Luckily, there are resources investors can use to help them do research on potential properties and make better decisions. Besides using MLS platforms like Zillow and Redfin to find properties, a quality real estate agent can help you find hidden gems that will make your investment more profitable. Working with a private lender that has experience in real estate can also help you secure better financing terms to save you money. Finally, you can utilize networking events and real estate groups on social media to connect with like-minded investors to expand your knowledge, and maybe even find a partner or mentor help you with an investment. It’s better not to go off alone, especially if you aren’t experienced in the world of real estate.

RCN Capital

The easiest way to save on your next investment is to obtain financing from a real estate lender that can get you the best leverages and rates. RCN Capital lends to real estate professionals, commercial contractors, developers & small business owners across the nation. We provide short-term fix & flip financing, long-term rental financing, and new construction financing for real estate investors. If you are looking to finance a real estate project, RCN Capital has competitive loan options available.