Thinking about investing in Real Estate? Not sure where to start?
Congratulations, you’ve made the decision to explore investing in one of the best wealth building tools there is, Real Estate!
Cashflow, appreciation, principle pay down (by tenant), depreciation, and leverage… It’s no wonder that most of the worlds wealthiest individuals own a substantial amount of real estate. You don’t have to have a ton of money to start, just a good plan moving forward.
So where to start??
When we decided to start investing one of the biggest things we did was EDUCATE ourselves. There are countless resources available to help properly equip you along your journey to your first investment property purchase. Learn about the financing, how to run the numbers, expenses, choosing a property manager, screening tenants, etc… There is more to investing than picking a “cute” property and crossing your fingers. Do your due diligence and educate yourself while also knowing you won’t truly know it all until you jump in!
DEFINE your goal. Now that you have a baseline of knowledge, what are you hoping to accomplish with your investing? Looking to provide some passive income? Looking for somewhere to park some of your money that is NOT the stock market? Maybe you’re a high income earner and need some write-offs eat tax season? Whatever your reason or end goal may be, lay it out and work backwards to define your first step(s) along that path. Having a goal and a plan is so important and it will help you reach that point faster.
ASSET CLASS. Now that you have your ultimate goal in mind, what asset class are you going to utilize to help you reach this goal? By asset class I mean types of investment properties… Single family, multi-family, commercial, storage units, apartments, etc. In each of these classes you can find people excelling and building substantial wealth. Some classes have higher barriers to entry than others. Some require more money upfront or are more hands on than others. Decide what fires you up, what is accessible, and what makes the most sense to achieving your ultimate goal. For us that has been multi-family properties…so far.
TAKE ACTION! Many “would be investors” get stuck on this step. They’ve read and consumed all the info they can. Have defined long term goals and what asset they believe will get them there. And then…they stop. Analysis paralysis is a term referencing this inaction in the investing process. People get so scared and hung up on small details or the feeling of not knowing EVERYTHING that they simply never take action. Understanding that you’ll never truly be 100% prepared until you jump in can help alleviate this worry. In reality, you more than likely will not become rich off your first investment deal. You also, more than likely, will not lose everything based off your first deal either. Not matter how bad things “could” go.
Sit back and count your money! Just kidding. ;) Now that you’ve made your FIRST Real Estate Investment keep going! Continue to learn about all that is involved in making this a growing cash flowing property. Familiarize yourself in legal topics, tenant screening, management (even if you have someone else doing that for you), value adding opportunities for your property, contractor/vendor relationships, budgeting, and financing options for your next purchase.
Real Estate Investing can be a very powerful tool in your wealth building journey. Many believe it is the single best and most achievable way for the average wage earner to build substantial wealth over time. Don’t overthink it, just get STARTED!