Let’s be real: everyone has envisioned how great life must be as a successful investor at least once or twice.
Earning a steady, passive income through a real estate rental business, or watching your money compound upon itself over time, is the dream for aspiring entrepreneurs who want to work smarter, not harder.
Unfortunately, becoming a savvy business mogul with a diverse investment portfolio is much easier said than done. Whether you’re starting in index investing or you’re curious about cryptocurrencies, there are a few things you’ll want to know before you put down any money.
Today’s post speaks directly to hopeful landlords and aspiring real estate investors in particular. We’ll go over how to get your start in the real estate biz so that you can make the plunge when the time is right.
Three Tips to Get Started in Real Estate Investing
Learn From Those Who Came Before You
If you’re nervous about making the first property purchase that will catapult you into the real estate game, well, you should be!
There is a tremendous amount of moving pieces you’ll need to be aware of, including everything from projected renovation costs, target profitability, neighborhood safety rating, and so much more.
Perhaps another professional networking site? Use the platform to pose a question to the people who follow you that are already invested in real estate and see how they respond in the comment thread. Some questions you might consider asking include:
- What’s something you know now that you wish you knew then?
- What was the biggest surprise you found after purchasing your first piece of real estate?
- What was your biggest challenge when it came to listing your home for sale or lease?
You might be surprised by the wealth of knowledge you gain from their experience!
Get The Right Funding
Not all mortgages are one and the same; you need to find the loan terms that work for your unique needs. Do you want to be in a 15 or 30-year mortgage? Or do you want quick financing for a fix-and-flip project with shorter repayment terms? In most cases, realtor investors prefer shorter, non-binding loans that allow them to easily move from one project to the next.
In that case, it’s wise to avoid cookie-cutter home mortgages in favor of faster, local lending. Say, for example, you found a killer deal on a San Antonio fixer-upper; you decide you want to renovate it and resell it at a higher price for profit. You’ll be able to close escrow and start your project much sooner by shopping residential hard money loans in Texas versus going through the online mortgage application at a nationwide bank.
Competition can be your kryptonite in the real estate industry, so getting ahead of the curve with quick funding for a fast close can make or break your success. As an added bonus, hard money loans don’t depend on the income level or creditworthiness of the buyer—meaning they’re ideal for first-time investors looking to make their big break.
Protect Your Property and Your Profits
Once you have a game plan and acquire the right funding, it’ll come time to pull the trigger on your first real estate purchase—protect it with your life. We’ve talked in length about how to protect your property in order to keep your rental income steadily streaming in, but the biggest takeaway is the need to structure your business as the correct legal entity. Tenant screening and properly executed leases will provide cushions against potential scenarios that might go wrong, but your business structure is how you’ll save the most on taxes while limiting your personal liability.
Buying rental properties under an LLC will afford you the most protection. If your tenants don’t pay rent on time, damage your property, or take you to court for whatever reason, an LLC can protect you against creditors, personal injury lawsuits, and similar issues that may arise during a landlord-tenant dispute.
That said, it’s always best to consult a real estate attorney in your area for the best advice. Let us know your thoughts on the best way to get started with real estate investing in the comments below!
There are tons of resources online to help you get started in real estate, we have even covered the topic several times on the blog. The biggest reason people do not make money in real estate isn't a lack of knowledge or information, its a lack of action. You can get started in real estate with as little as 500 dollars, so what's stopping you? Get out there and make some deals! 🙂
Michael launched Your Money Geek to make personal finance fun. He has worked in personal finance for over 20 years, helping families reduce taxes, increase their income, and save for retirement. Michael is passionate about personal finance, side hustles, and all things geeky.