Real estate investment is often perceived as “easy money,” but the reality is quite different. While it can be profitable, it requires hard work and dedication. If you’re interested in real estate investing, here are seven essential things you need to know before getting started:
1. Seek a mentor
In today’s world, mentorship may seem outdated, but it remains an invaluable practice that has been utilized by thinkers, craftsmen, and business owners for centuries. As you venture into real estate investing, it’s recommended to find an established professional in the field and ask them to mentor you during the initial 1-2 years of the process.
2. Separate your investments as a distinct income stream
Although setting up business accounts may seem tedious initially, it becomes evident during tax return filing that the time spent on establishing a separate bank account saves significant hassle. Ensure you create a dedicated business account for your investments, maintain thorough records of all income and expenses, request invoices from contractors, and keep backup copies of essential documents. Additionally, consider investing in online eREITs and compare different options to find the one that suits you best.
3. Conduct thorough research before investing
Before purchasing a property, it’s crucial to delve deep into researching every aspect of the house. Acquire comprehensive knowledge about what you’re buying. Some individuals advertise undesirable properties, hoping that buyers won’t conduct proper research. Avoid making this mistake. If you have a mentor, they can guide you on identifying red flags and what to be cautious of when buying a property.
4. Start small if renting out properties
Wise investors and businessmen plan for worst-case scenarios. While it’s not advisable to assume you’ll make no money or find no tenants, it’s prudent to prepare yourself financially even if everything goes wrong. When buying your first property, ensure you could afford the mortgage payments even without tenants. If that means purchasing a smaller house or flat than originally planned, it’s a sensible approach. By planning ahead, you can avoid financial trouble.
5. Resist the urge to overly improve your first flipped house
When flipping your first house, be aware that certain renovations increase the property’s value, while others do not. For example, making the living room open-plan adds value, but spending time and money on trendy wall colors and expensive curtains does not yield significant returns. Be strategic with your time and investments. It’s tempting to do everything, but it’s more effective to avoid wasting time and money on unnecessary improvements.
6. Don’t risk it all with your first home investment
Purchasing a highly distressed property in an up-and-coming area may seem enticing for your first investment. However, it comes with substantial risks. It’s better to make a slightly less lucrative but reliable investment initially. Buying a middle-class house in an area with stable house prices is a safer approach. Considering Blairsville, GA, as a potential location can provide stability for your investment.
7. Embrace seeking advice
Lastly, be open to receiving advice from experienced individuals in the real estate investing field. They have achieved success for a reason and their insights can save you from making bad investments or guide you toward profitable opportunities.