There’s a lot of pre-planning that goes into becoming a real estate investor. Doing your research and planning your route are vital steps to setting yourself up for success. But equally as important are your first steps to officially entering the real estate world. Sometimes new investors can get bogged down in the planning phases
Don’t be stymied by this kind of action paralysis. Once you’ve gotten through a decent amount of preparation, there is no benefit to waiting. When the research is done and you’ve got your credit settled, it’s time to dive in. If you’re having trouble figuring out where to start, then these 7 steps should help you get going.
1. Search through Sales
You’ll need to get your feet wet in your chosen market. Whether you’re buying locally or looking to lay down roots out of town, you’ll want to familiarize yourself with your area’s unique prices and quirks. Look for the following stats:
- Housing Prices
- Average time spent on the market
- Average rental costs
- Prices for home renovators in the area
In addition to browsing for a familiarity with prices, you’ll be looking for sales data as well. Your target market is more than just what properties are for sale and how much people bought them for. It’s important to get a gauge on how many people are renting in your market, as well. You don’t want to try to sell homes in an area where most people prefer to rent, or vice versa.
2. Get in touch with a realtor
Unless you want to be doing all the legwork yourself, you’ll want to have a realtor on your team. Feel free to be picky with who you choose. If you aren’t working well with someone, then switch around until you find a realtor who checks off all the best qualities of a successful realtor.
3. Check out the REIA
The National Real Estate Investors Association is a good tool for all investors, especially the newer ones. Joining the REIA is a good idea. They are a trade organization that looks out for the interests of real estate investors. Most of their chapters are located on the eastern side of the United States, but they have resources for investors throughout the country. They do charge a membership fee, so familiarize yourself with all they have to offer to determine if it’s worth it for you.
4. Get in with a lender
Contact your preferred lender if you haven’t already. Even if you don’t have a specific property you’re interested in yet, you should still go to a local bank or credit lender and establish yourself. Your best move is to pick a local lender committed to your community as they’ll likely be more invested in seeing you succeed.
A meeting with a lender will also be the perfect opportunity to identify any remaining problem areas with your credit or finances.
5. Crunch the numbers
Now that you’re making your first moves in the investing world, it’s time to start looking at projected costs and earnings. Before you get entangled with the bidding process on any properties, take a good look at the likely costs of the building (including repairs or renovations and all possible taxes and fees) and compare it with your potential earnings. Familiarize yourself with this process, because you’ll be doing it a lot. You’ll probably look at dozens of properties that you won’t buy for each one that you do.
6. Budget, budget, budget
It can’t be overstated how important budgeting is. You’ve likely created a pre-budget for yourself during the planning phase, and that’s an excellent start. But once you’ve stepped into the investing world for real, you’ll want to take another pass at those numbers. Sometimes it can be tricky to accurately conceptualize how much investing in a property is going to cost you until you’ve seen some of the official prices for yourself.
And don’t stop at budgeting your investment money. You’ll want to start budgeting your personal expenses, as well if you haven’t already. If you don’t have a firm grasp on your personal finances, you can’t expect your investments to go smoothly.
7. Look to the future
So you’re finally moving in on your first investment purchase. You’ve picked the property and the ink is starting to dry on the paperwork. You’re giddy with excitement and nerves. Though it’s tempting to relax and bask in the glow of your first successful investment, now is actually the time to be planning ahead. Set up a five or ten-year plan. You’ll likely deviate from it at least a little in the long-run, but it’s good to have a general idea of where you’re going and how you plan to get there, or else you might find your whole investment venture veering wildly off course.
Christine Yaged is a co-founding partner and Chief Product Officer of FinanceBuzz. Christine launches and scales brands. She is passionate about technology, digital marketing, and people.
