The stock market is far from the only way to save for the future — and a paycheck is far from the only way to maintain a steady cash flow. Investment properties provide both new and experienced investors with a wealth of options to earn money now while growing capital for later.
Thanks to an overabundance of online resources, real estate investing (often abbreviated as REI) has become one of the most popular investment options today.
However, it’s a little more complicated to purchase a new property than it is to buy a few shares of stock. This guide provides a helpful outline for anyone looking to enter the lucrative world of investment properties.
Why Should You Buy Investment Properties?
The answer to this question depends entirely on you and your goals.
Some people prefer to buy rental properties, hire property managers, and think about their assets as little as possible. Others buy multi-family properties and renovate them, one room at a time, while renting out the other units.
For another investor, investment properties might be a way to grow wealth while maintaining a future residence for an older relative or younger family member who may need assistance.
Before beginning to invest in real estate, it’s important to consider your risk tolerance. While it’s true that you don’t need hundreds of thousands of dollars to get started, you should not over-leverage yourself.
Investment properties can help you meet a variety of financial goals, but to make those goals become reality, you must follow a cohesive strategy.
Real Estate Investing for Beginners
You have a little cash and a vision for the future. Now, you want to grow your money in the world of real estate. Congratulations on a positive first step!
To help you get started, we have put together a step-by-step process of how a successful lifetime of real estate investing begins:
1. Get Passionate About Your Investment Property Education
If you want to buy a property but don’t know the difference between a closing date and last call, slow down a bit and start doing some research. Great opportunities in real estate aren’t going anywhere.
Play with financial calculators and speak with experts to gauge how much you can afford to invest. Understand what realistic returns and expenses might look like. The more you learn, the fewer beginner mistakes you’ll make (and pay for!) with your first buy.
2. Introduce Yourself to the Community
There are plenty of people who make money from investment properties. Many of them congregate in online communities to share their stories, troubles, and tips. Join Facebook groups of real estate investors, especially any local groups. Look at Reddit and join the finance communities there that align with your goals.
Doing your research first will show people you’re serious, and engaging in conversation with more experienced investors can further your ability to make your money grow.
3. Confirm the Strategy that Matches Your Goals
With more research and conversations under your belt, you can finally select the right strategy and begin to act. Do you want to buy a fixer-upper and fix it for an immediate profit? Perhaps you want to turn a vacation home into a short-term rental property?
Whatever your goals, there is a strategy that aligns with them. Understanding that strategy now will help you make smarter decisions later.
4. Build Your Network
Every real estate investor needs a solid network of help to maximize the potential of each investment. If you fix houses to sell, you should be familiar with contractors, handymen, landscapers, electricians, realtors, and others who can help you make big changes at affordable prices.
A person who specializes in short-term rentals may not need to know many contractors but should have good relationships with cleaning services, people running local attractions, and online rental platforms.
5. Find Your First Property
You know how much money you have, how much you expect to make, and what your path toward that money will be. You’re ready to buy your first property. Tap your investment property network for leads and watch online sources like New Western, Zillow, and Craigslist closely.
Properties can move quickly, so make sure you have your finances in order ahead of time. When the right property comes up, you can pounce on it, confident in the knowledge gained from your research.
6. Close on the Property and Get to Work
Closing day on an investment property doesn’t feel like a closing day on a new home, even if you plan to live there. Before you have the keys in hand, make appointments with your contractor, cleaner, repair company, and other parties to minimize the time your property sits idle. Waiting to implement your investment property strategy is like leaving the money you meant to put into the market in your checking account.
7. Execute Your Plan
Once you fix the property, clean it, hire a property management company, move in, or take whatever other steps were part of your plan, it’s time to realize the gains. Put the house on the market or start renting it out.
Get the money flowing. You didn’t put in all that work not to reap the rewards. Don’t get stuck in the cycle of finishing “just one more” project. The property will never be perfect, but it can be a source of revenue and a vehicle for financial growth, right now.
8. Review the Lessons and Do It All Again
The odds are good that something will go wrong with your first investment property. Some pieces of paperwork will turn into a headache, some partners will turn out to be unreliable, or someone staying in the home will cause damage.
Don’t let it get you down. Review what you learned, adjust your approach, and come back smarter the next time. You have just taken the first real steps toward a stronger, more diversified financial portfolio.
Once you see the benefits of investment properties and real estate investing as a financial strategy, you will wonder why you didn’t start sooner. Whether you have plenty of capital to spare and want to test the waters or you’re a do-it-yourself person with a passion for renovating bathrooms, the world of investment properties has room for you. Use this guide to get started, then share the lessons you learn with others to help the next person on the journey.
When you’re ready to get started, New Western can help you find the right opportunity. Our agents uncover value-rich properties for their investor network and provide easy access to opportunities you wouldn’t have otherwise. We also work behind the scenes to eliminate problems, deliver a clear title and provide a fast, seamless process to close.