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5 Tips to Get Your Foot in the Door of Real Estate Investments

Real estate is something many individuals want to get involved in but some don’t know where or how to start from.

There are so many real estate books, blogs, articles and bits information to get through which can make seem rather intimidating and complex at first. However, taking the time to understand a few general points will have you feeling confident and ready to take on the industry.

If you are interested in getting involved in real estate investments, it’s best to have the financial backing, necessary licenses and a good portfolio. Take on the mindset of an entrepreneur and understand the dynamics of the market.

The tips below will explain some points to help you get through the door of real estate investments.

Consider Real Estate Crowdfunding for a Stress-Free Approach

The new opportunity in real estate crowdfunding investments can be a great starting point for new investors. Instead of having to manage your own properties, something that can be a full-time job itself, you can invest in multiple projects alongside professional developers.

Real estate developers and other investors offer their projects on real estate crowdfunding sites. The platforms have analysts that verify the properties and the developer’s history with only about 5% of submitted deals making it in front of investors. Investors can then pick which deals in which they want to invest, usually as little as $1,000 per deal.

Besides the opportunity for professional management of your investments, crowdfunding allows you to diversify your portfolio with deals in different property types and across the country for a fraction of the cost it would take with direct ownership.

I follow several real estate platforms to get access to as many deals as possible. It costs nothing extra to have an account on more than one crowdfunding site and you’ll be able to invest in more deals.

RealtyShares is the leader in real estate crowdfunding with over 30,000 investors funding $300 million in deals. The site features both equity and debt investments on commercial and residential projects.

how to start real estate crowdfunding

PeerStreet offers investment in real estate debt on commercial property. Since the debt is back by the property, it’s much safer than equity investment but still targets returns between 8% and 12% on an annual basis. I use PeerStreet to balance out the risk in my equity investments on other platforms.

EquityMultiple is a newer real estate platform but one that is getting some very good deals. The site targets only institutional-quality commercial properties instead of individual developer deals. That means projects are often also backed by big money institutional players that can help make the deal a success.

Click to browse deals for free on RealtyShares

Get a License and an Education

In order for you to quickly embark on your real estate ventures, you need to obtain a license. Prices vary depending on the state you live in and the process of getting one requires you to pass both state and national exams.

Education is important in addition to getting a license. In some states like California, you need a certain number of courses (at college-level) while in others, you would need a set number of hours of lectures.

Build Up on Strength

If you choose to go down the investing route, make sure you have your finances in order first as this can put you in a position of strength.

Also, work on building up a good portfolio, not forgetting to nurture and maintain relationships with people along the way. Have a backup plan and create a cushion around your business to ensure that if something goes wrong, you don’t end up in the pit.

Don’t expect to see returns on investment straight away. Many investors don’t earn any commissions or see money until several months down the line.

Rent out Rooms and Have Money in Your Pocket

When you invest in a property to rent out to tenants, part of the monthly rent paid to you will count as profit. For example. Let’s assume you rented out a 4-bedroom duplex at $1500 each and your mortgage was $800. Also, assume that 5% was budgeted aside for any monthly house repairs, which would come to $35. You have four tenants so in total that would be $140 in the bank. Your profit at the end of each month would be $2660.

Decide Which Type of Real Estate You Want to Invest In

There are different types of real estate properties available for you to invest in. Residential real estate properties are houses, apartments, or buildings suited for individuals and families to live in.

Commercial real estate are offices. Skyscrapers can fall under this category of real estate too. If you were to develop, build or acquire one, you could lease offices out to business owners looking for offices to rent and make money through that.

Many investors have multi-year leasing contracts which is a great way for them to secure themselves when rental rates drop. However if the rates increase, investors may not be able to cash in on it as they would be tied into existing agreements.

Retail and mixed use investment consists of shopping malls and stores or any of the aforementioned.

You can get a good return on investment in retail real estate, as landlords often get a percentage of sales, coupled with base rent.

Improve Your Credit

Investing requires huge amounts of money and loans allows you to fund business ideas. Furthermore, many real estate investors take out bank loans to help get things started.

If you intend to do this then review your credit before investing in property. Also, if you spot any errors on your credit report, sort it out quickly but if they are legitimate, you will need to work towards improving it.

Banks need to know if lending money to you would be risky. Therefore, your credit needs to be perfect to get a bank loan for investing.

Getting your foot in the door of real estate investment requires having sufficient funds to cover expenses, building up an impressive portfolio, having good credit and nurturing relationships, just to name a few. Once you have some of these things in order, feeling comfortable, seeing results and navigating your way through the market will seem easier.

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