3-26 How to Start Real Estate Investing and Hit the Ground Running :: The Construction Management Pro

3-26 How to Start Real Estate Investing and Hit the Ground Running

This article covers seven dynamite real estate investing tips intended to help anyone just getting started in real estate investing to successfully launch and hit the ground running with real estate investment property.

1. Develop the Correct Attitude

To stand a chance of succeeding at real estate investing, foremost, you must understand that real estate investment is a business, and you will become the CEO of that business.

As your first order of business, then, it’s crucial to develop the correct mind-set about investment real estate and be able to make this distinction between buying a home and investing in real estate:

You buy a home to live and raise a family; you buy real estate investment property to reach a financial objective; passive income, capital gain, return on investment.

As one very successful real estate investor said, “Only women are beautiful; what are the numbers?” In other words, you will not succeed at real estate investing until you acknowledge that it’s not curb appeal, amenities, floor plan, or neighborhood that should turn you on or off to the investment opportunity; what counts most is the property’s ability to perform financially.

2. Develop Meaningful Objectives

A meaningful set of (realistic) objectives that frames your investment strategy is one of the most important elements of successful investing. Yes, we may all desire to make millions of dollars from real estate investing, but fantasy is not the same as expressing specific goals and a method on how to achieve it. Have a plan and then execute it.

Here are some questions you need to ask:

How much cash are you willing to invest comfortably? What rate of return are you hoping to achieve by making the investment in real estate? Are you expecting instant cash flow, looking to make your money when the property is resold, or merely looking to achieve tax shelter benefits? How long are you planning to hold the property before you dispose of it? What amount of your own effort can you afford to contribute to the day-to-day operation of running the property? Do you know enough about property management to do it yourself, or do you know of a reliable property manager? How much passive income are you looking to generate and why and by when would you like to achieve it? What type of income property do you feel most comfortable owning, residential or commercial, or does it matter?

3. Develop Market Research

If you’re new to real estate investing, you undoubtedly know little about investment real estate. Start in your local market. Do market research to learn as much as you can about income property values, tenant/landlord laws, rents, and occupancy rates in your area. The better prepared you are, the more likely you are to recognize a good (or bad) deal.

Here are some good resources:

(a) The internet is a great place to start (Zillow, Trulia, Realtor.com), (b) A local appraiser, (c) The county tax assessor, (d) A qualified local real estate professional, (e) A local property management company

4. Run the Numbers

I can’t stress enough the importance of running the property’s cash flow, rates of return, and profitability numbers. Remember, real estate investing is a business, and as the CEO of your investment enterprise, you’ve got to know what you’re buying, especially if you’re trying to determine which of several investment opportunities would be the most profitable. Do they meet your Plan’s objectives?

You have two options:

(a) Invest in real estate investment software. This will enable you to discover for yourself the investment property’s cash flow and rates of return, and create your own analysis reports. Plus, by running the numbers yourself, you gain a broader understanding of real estate investing nuances, and in turn might be less likely to fall victim to the wiles of someone with little concern about how you spend your money.

(b) At the very least, work with a real estate professional that has invested in real estate and can calculate, present, and discuss the property’s financial data with you.

5. Develop a Relationship with a Qualified Real Estate Professional (not all Realtors know the what properties can sell/rent for)!

Working with a qualified real estate professional is a great way for beginners to get started with rental property investing because an astute professional can acquaint you with local market conditions, recommend a property that meets your investing objectives, and discuss strengths and weaknesses about specific property performance.

Here’s a warning, however: Work with a real estate person who understands investment real estate. This is totally different from buying and selling homes!

Be sure the agent has a firm grip on key financial measures inherent to real estate investing, knows how to measure profitability and rate of return, has the ability to present the data you need to make wise investment decisions, and, most importantly, shows a genuine interest in how you spend your money. The last thing you want to do is to get involved with a real estate agent that would throw you under the bus just to make a commission.

Here’s a good way to interview for an agent. Ask them for the property’s cap rate and then request an APOD. If their response (even to these basics) is to stand there looking at you like a deer into the headlights of a car, find another agent.

6. Find a financial advisor who understands the accounting, tax and legal implications of real estate investing. Not all lawyers, accounts and realtors are created equal. There are a number of decisions that need to be made from ownership entity of the property, how expenses and categorized and your investment intent that all make a substantial difference in how the property will ultimately perform financially.

7. Start Investing

Hopefully, this has given you some insight into real estate investing, highlighted a few things to make you a more prudent real estate investor, and perhaps alerted you to a couple of things that should be avoided.

Okay, that does it for us, now it’s time for you to get started. Here’s to your success.

James Kobzeff is the developer of ProAPOD Real Estate Investment Software. Want to start working with rental property today? Discover how to create cash flow, rate of return, and profitability analysis presentations in minutes at => http://www.proapod.com

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