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Investing in Real Estate: A Complete Guide

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Investing in Real Estate: A Complete Guide


Investing in real estate is considered one of the safest and most profitable entrepreneurial ventures. A property that is well managed and properly maintained can yield high earnings. Just as importantly, real estate typically increases in value over time. 

Furthermore, there are countless ways to invest in real estate to start building your wealth. There are fix-it and flip-it strategies, single-family rentals, apartment complexes, commercial spaces, and more. 

Clearly, real estate investing is a good idea; however, if you are new to the game, you might not know where to begin. 

Keep reading for a complete guide on how to invest in real estate in your hometown.

Evaluate Your Budget

First, let us talk finances. While investing in real estate, the motto "you have to spend money to make money" is true. 

You must have some level of funding to work with. Your budget can be comprised of personal savings, trust money, money borrowed from the bank, etc.

Evaluate your budget to determine how much you can afford to spend on your real estate investment. On the other hand, it is important to understand the true costs of your investment. 

For example, if you are going to buy a home to rent out to tenants, you need to consider:

  • Property taxes
  • Necessary repairs or renovations to make the home move-in ready
  • Realtor fees and closing costs
  • HOA fees (if applicable)
  • Utilities
  • Yearly maintenance and repairs
  • Taxable income
  • Etc. 

With any rental unit (residential or commercial), you need to be prepared for periods of time when the unit sits empty. Can you afford the costs of your investment if you do not have tenants for several months at a time?

All real estate investment properties differ in their expenses. Make sure you do your homework to understand the costs before signing the contract. 

Get Preapproved for Your Real Estate Investment

If you are not independently wealthy or financially backed, you will need to take out a loan if you're planning on investing in real estate. Approach your bank and other lenders to get preapproved for a loan. This will help you determine your loan eligibility and overall budget. 

However, commercial real estate loans typically require outstanding credit scores. If you have a poor or limited credit history, you may not be able to get approved for the loan you want (or any loan). In this case, you have multiple alternatives.

First, you can take a step back and spend some time building up your credit. Depending on your financial circumstances, however, it can take months to get the credit score you need to qualify. 

Conversely, look for a business partner or co-signer with whom you can share your venture. If they have a good credit score, you can get approved for the loan together. This would mean sharing profits, decisions, and other important aspects of real estate investing. 

Lastly, consider finding investors. This includes:

  • Angel investors
  • Private investors
  • Personal investors (friends and family)
  • Crowdfunding groups
  • Etc.

No matter who helps you fund your real estate investment, they are going to want a piece of the pie. Take your time and do not make any rash decisions. Think long-term about the consequences of your choice. 

Explore the Various Real Estate Investment Options

Once you get the funding you need to start investing in real estate, you can allow yourself to dream a little. What kind of real estate do you want to invest in? In the world of commercial real estate investing, there is no shortage of options and opportunities.

Here are the most common real estate investment strategies. 

Residential Rentals

Residential rental properties are some of the most common (and straightforward) types of commercial real estate. There are single-family homes, multi-family homes, duplexes, apartment complexes, and more. 

As someone new to investing in real estate, purchasing a single-family home might be your best option. It is easily affordable and simple to manage; however, it will only provide one string of income.

If you have more available funding, you can earn more revenue by investing in a multi-family home, duplex, or multiple-unit complex. Keep in mind, the more units you manage, the more responsibilities and expenses you will have. 

Fix-It and Flip-It Properties

If you do not like the idea of being a landlord, you can invest in fixer-upper homes. Look for homes for sale that need work in your community. This could mean:

  • Outdated living spaces
  • Damages
  • Lack of maintenance
  • Etc.

You can invest in these types of homes for pennies on the dollar. You will want to be sure that you know exactly what you are getting into before you make the purchase. You will want to have the home professionally inspected first.

In some cases, the costs to repair and renovate a house are too high, which cuts too deeply into your total revenue. Other homes are so badly distressed that there is no saving them. 

If you go this route, find a local contractor with whom you can establish an ongoing professional relationship. This can help you save a lot of money on renovations and materials. Otherwise, much of your profit will go out the door to the contractor.

Commercial Properties

Commercial properties are another common method for investing in real estate. These, perhaps, offer the greatest variety of options. 

For example, you can invest in:

  • Office buildings
  • Industry buildings
  • Healthcare facilities
  • Gyms and recreational facilities
  • Retail spaces
  • And more

Commercial property investing is ideal for renting to business owners. You can earn a passive income simply by providing a space for other people to operate their business. 

Alternatively, you can buy properties like hotels and hire people to manage them for you. You will own the business and the property and have as much (or as little) involvement as you want.

Decide What Type of Investor You Want to Be

Now that you know a little more about your options, you can identify which strategy is most appealing to you, but before you decide, let us take a look at some important factors you need to consider. 

Costs and Potential Earnings

As with any type of investment, investing in real estate should not be done without understanding your prospective financial projections. In other words, what will be your costs compared to your earnings?

A fix-it and flip-it investment can provide a quick, high-yielding revenue, but it is a one-time payout. 

Rental properties, on the other hand, provide a continuous stream of passive income (provided you have tenants). Yet, holding onto the property has its own costs, such as those listed in the first section of its article.

Property Owner Duties and Responsibilities

Another thing to consider is the responsibilities entailed with each type of property investment. If you buy a property to fix and flip, there are fewer obligations, but if the house does not sell, you will not make any money.

Conversely, owning a rental unit means taking on landlord duties and responsibilities. This includes:

  • Property and landlord insurance
  • Building maintenance and repairs
  • Common area maintenance
  • Finding and screening tenants
  • Collecting rent
  • Handling evictions
  • And more

However, you can also hire a property management company to do all of this for you. While this will take some money out of your pocket, it can also eliminate tedious responsibilities and save you a lot of time and stress. 

Hire an Experienced Commercial Real Estate Agent

By now, you should have a pretty good idea about the type of property you want to invest in. Hiring a commercial real estate agent is the next step for investing in real estate. They can help you find the right property in the right location based on your budget and business goals. 

While some people attempt real estate investing without a realtor, this is not a good idea for new investors. A commercial real estate agent has a lot to offer. For example:

  • Ample experience in the local real estate market
  • Knowledge of the various commercial districts and residential neighborhoods
  • Negotiation expertise (to help you get a better deal)
  • Important affiliations in the community (general contractors, lenders, insurance agencies, agents, other local business owners)
  • And more

Just as importantly, commercial real estate agents will have more access to the available properties in the area. They can help you gain entry for private tours and work with you to find exactly what you need. 

Market Your Property

Finally, when investing in real estate, you need to think ahead about your long-term success. Procuring a commercial or residential property is not enough to start building your wealth. You need to learn how to market your property to attract buyers or tenants. 

Implement an effective digital marketing strategy to increase the visibility of your property in the community. This will help you find business owners or residents looking for a space to rent. Your marketing strategy should include:

  • A user-friendly website
  • SEO marketing 
  • Social media marekting
  • Paid marketing (PPC)
  • Content marketing 
  • Newspaper listings 
  • Radio ads
  • Flyers and print-outs
  • And more

Additionally, be sure to place signage in front of buildings that have vacancies. Include simple contact information, such as your phone number or website address. 

Finally, look into 3D tours for your rental units or properties for sale. These allow potential tenants/buyers to virtually walk through the unit or building.

Planning on Investing in Real Estate?

If you are looking into investing in real estate, make sure you have all of your ducks in a row before you make any decisions. While real estate investing can be incredibly lucrative, you need to do your homework to know what you are getting yourself into. 

And if you are ready to start looking at your options, use our site to find "real estate agents near me" for your new business venture. You can also browse through some of our other articles to learn more about buying, selling, and renting real estate.