436: 4 Simple Steps to Become a Successful Real Estate Investor

SHOW NOTES FOR EPISODE 436: 4 SIMPLE STEPS TO BECOME A SUCCESSFUL REAL ESTATE INVESTOR

Becoming a successful real estate investor is not as difficult as many people think.  Sure there is some basic knowledge required but it’s action and perseverance that will make you successful.  In this podcast, Bill presents the essential steps necessary to become and succeed as a real estate investor.

Tip of the Week

Set a budget and timeline (and expect to go over both)

• My rule of thumb is that you should set aside 50% more of your budget as reserves, especially as a new investor. Your budget almost always goes higher than anticipated and when you’re rehabbing or doing a turnaround, one issue can detect another one, etc.
• For example, fixing a leaky pipe may turn into replacing the pipe and removing mold damage and replacing the drywall. In terms of timeline, I would say that the same thing goes: If your timeline is 60 days, prepare for the project to take 90 days. With added expenses, comes added time.

4 Simple Steps to Become a Successful Real Estate Investor

As an investor, you may already have a financial portfolio that is brimming with stocks and bonds. Take it further and amplify your returns within a few years by investing in real estate.

1. Education

Before you become a real estate investor, you need to educate yourself on what real estate investing is.  Read books (I have 20 recommendations in the Resources section of the Old Dawg’s REI Network Website).  Also, listen to podcasts, watch YouTube videos.  Attend boot camps, webinars, conferences, masterminds, join clubs and meet-ups.

2. Get a Mentor

It helps to have an experienced person you can run things buy, get advice from and generally help prevent you from making mistakes.  Connect with someone who has experience in the type of investing you will be doing.

They come in all sizes and shapes.  If you just need to check-in every now and then – easier to find

If you require real hand-holding – Pay

3. Write a Plan

Identify your “Why,” your mission, vision, goals and strategies.  But don’t get hung-up on writing a 200 page Business Plan or thesis.  Keep it simple in the beginning so you know where you are going.  Over time, it will become more sophisticated and detailed.

4. Take Action

This is by far the toughest step for most.  It’s easy to dabble with the first three but this is where the rubber meets the road

Action Steps

Choose a Real Estate Investment Location

When it comes to real estate investing, location has the biggest impact on your returns. Resist the urge to settle on properties around your immediate vicinity. Research the property price, rental rates and occupancy rates before investing. Make sure you also go through the price of the property over the last few years to determine its appreciation in the market.

These facts and figures can help you assess the value of your real estate investments. Do your due diligence and pick a strategic location that’s profitable.

Choose an Investment Strategy

There are 2 general categories of real estate investment – active and passive. Depending on your financial needs and available time, you can invest in real estate properties accordingly.

• Passive Real Estate Investing

  • If you are new to investing in properties, passive real estate investing may be a better choice for you. Passive real estate investing involves buying small units of real estate properties. These shares give you a fixed rate of return on your investment.
  • Based on your financial goals, you can consider these methods of investing.
    • REITs: Many companies finance and manage real estate investment trusts (REITs). REITs are low-cost investments that can boost your stock portfolio. You can own shares of multimillion-dollar residential and commercial real estate properties through REITs. These companies have full control over which properties to invest in. You can’t pick specific properties to invest in yourself.
    • The rent collected from these high-profile properties goes into paying dividends to investors. These payments are usually done at the end of a month or a quarter. You can check out our guide on how to invest in REITs for more information.
    • Crowdfunding: Crowdfunding companies are online businesses that pool money from people to invest in real estate. These online platforms allow you to directly invest in properties. These platforms have a limited number of properties to choose from. You can go through these websites to find specific information on the properties. These details include the location, rental agreements and rate of return.
    • Most popular among the crowdfunding platforms are Fundrise, Groundfloor, CrowdStreet and DiversyFund. To sign up for an account on these crowdfunding platforms, you may need to deposit a small amount of money as minimum balance.
    • Limited Partner of Real Estate Syndication: Where you invest as a sophisticated investor or accredited investor

• Active Real Estate Investing

If you’re a professional investor, active real estate investing can provide better results. With considerable capital and time at your disposal, you can make huge profits. This type of investing involves a hands-on approach. You must increase its value by upgrading facilities before selling it at a higher price.

This can be highly-volatile due to maintenance costs and unforeseen expenses. Based on your risk profile, you can consider these methods of investing.

Property ownership: You can outright buy a property and manage it by yourself. Although this sounds appealing to an investor, it’s not the most workable option. To begin with, you will have to find low-cost properties in prime locations. These locations should have high occupancy rates.  Property ownership also means more responsibility. Be prepared to take time out of your busy schedule for routine upkeep and repairs.

House flipping: In real estate investing, house flipping is a common strategy. It involves buying a property for a low cost, refurbishing it and selling it at a higher price.  A successful house flip can earn you profits in less than 6 months or a year. Be careful while calculating your expenses for renovating the house. These expenses can accumulate and eat away at your profit margin after the sale.

Wholesaling: Wholesaling involves buying distressed houses and selling them to house flippers. This method is less of a hassle compared to house flipping. Unlike house flipping, you are only responsible for selling the house. The house is then refurbished and resold for a higher profit margin.  Having a well-connected network of real estate agents is crucial to wholesaling. The biggest challenge with this technique is finding people who are willing to sell a house below the market price of the property.

Pick an Investment Property

The real estate industry is diverse. It offers many different types of properties to invest in such as:

• Residential properties: These properties include single-family homes, multi-family housing, apartments and condominiums. In some cases, it can also include villas and vacation homes. After you have secured the funding, you can find suitable tenants to occupy it. Regular rents can be the easiest sources of income. But the managerial costs of the house during vacant periods can turn into a financial strain.
• Commercial properties: These properties include malls, hotels, retail stores, office spaces and restaurants. Occupied by businesses and organizations, commercial properties tend to generate a much higher income through rent. These rental agreements can last for years, solidifying your long-term returns.
• Industrial properties: These properties include research centers, warehouses, storage facilities and manufacturing facilities. Industrial areas need the least maintenance and involve no construction costs as an investment.
• Agricultural properties: These properties are generally vacant lands used for farming and livestock. Many investors buy farms for cultivating cash crops such as coffee, corn and rice.

Manage Your Investment

Once you have decided on the property type, management is your next biggest concern. These tasks can range from screening tenants, collecting rent, security, maintenance and roofing.

Some investors hire property management companies to take care of these needs. But doing so will mean an added managerial fee to your real estate expenses.

Earn Income from Real Estate

Take advantage of the amazing capacity of real estate investments to produce income. Regular rents can beat the performance of traditional real estate stocks. Don’t miss your chance to expose your portfolio to real estate earnings.

DISCLAIMER:  Many of the above strategies take knowledge and have a higher degree of risk.  You need to do your research and/or work with someone who is experienced to reduce your risk.

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Additional Episode Sponsor: Meno Studio – menostudio777@gmail.com