5 Tips On How To Invest Wisely In Real Estate As A Beginner

For most of us the idea of investing in real estate is a good one but knowing how to invest wisely doesn’t just happen all by itself. While there is no such thing as a sure thing, real estate has proven to be as solid an investment as there is over the long term. Indeed, more millionaires are created by investing in real estate than any other industry.

So how do you get started? Good question! I have laid out a few simple steps in order to help anybody get started on the road to financial freedom by investing in real estate.

1. Do you live in a house/condo that you own? Owning your own house is most practical. What I did when I bought my first house was to buy one with a garage apartment. The rent from this studio apartment paid half my mortgage payment and really added to the value when I sold it. One of my friends decided to buy a two-family house. He lived on the one side and rented the other side out. Also, if you already own your own house, you can pull equity out to purchase an income producing property. I would be cautious to pull out equity for anything other than buying a wealth building asset. Equity is not to be used for vacations, new cars, new 54” platinum screen tv, etc… To invest wisely you need to know the difference between what poor people do and the wealthy people do. The wealthy incur debt to build their wealth by investing in things that appreciate in value not by buying things that depreciate in value.

2. Where you live is what you know. So invest wisely by going with what you know especially if you are a beginner. You know where the war zones are and what areas to avoid. Don’t be afraid of properties that have minor problems. Buying properties that need minimal repairs such as paint, carpet, landscaping, for example, is a great way to improve the value quickly. However, if you are the “handy-man” type, buying older or damaged properties and renovating them can lead to huge profits. I personally, have done several rehabs but I paid someone to do the work. My time is better spent looking for more properties than actually doing the work. However, if you are just getting started and can the work yourself that’s great! Please remember, if you don’t know what you are doing you can waste time and money taking on this type of project. My philosophy is to find the experts and let them do what they are good at.

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3. Know the real market value of the property. The best way to be sure you invest wisely is to have an appraisal or a professionally executed comparative market analysis done. Don’t rely on what the house next door sold for, what friends tell you its worth or what you wish the market value would be. The real market value is a real number and must be a true number. Remember you make your money when you buy you get paid when you sell. I don’t pay retail. I always want to buy properties that are under market value for a bigger quicker profit margin.

4. Commercial real estate is no different than buying a house and renting it out. However, invest wisely and keep it simple when just starting out. For instance, you could buy a space in the building where you work and rent it out to a tenant like yourself. Commercial real estate can become complicated but it can be very rewarding as well. Don’t jump into commercial real estate without understanding the different kinds of transactions required for owning and managing these properties. There are different kinds of leases and a variety of arrangements for utilities, taxes, insurances, common area maintenance and the like that you need to be familiar with.

5. Invest wisely by investing in your real estate education. There are a great number of books, seminars and courses that can give you a quick jump to avoid costly mistakes. Seek counsel and advice from people that are currently buying and selling real estate. Learn from their experience.

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In my own experience, I see novice investors just jump in without spending any time getting educated on what a good deal actually looks like. It is very sad to see them end up in some bad deals instead of taking it one step at a time and learning about the ins and outs of the real estate investing world.

So, while I do encourage you to invest in real estate, I also encourage you to invest wisely in income producing real estate. Learn what to do so you can get rich, stay rich and pass it on to future generations!