How to Become a Real Estate Investor
Real estate will always have value because people will continue to need homes. But, learning how to become a real estate investor is not as simple as you may think. It takes research, knowledge, and mentorship to find success.
Learning how to become a real estate investor can be confusing, but it can be exciting to see your real estate income stream come to life. Read on to learn how to get started in real estate investing.
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Getting Started in Real Estate Investing
The first step in learning how to become a real estate investor is to gain knowledge about the real estate market. This involves practical experience, mentorship, and individual study. You need to understand the risks, analyze expenses, build your network, and determine your personal real estate investment strategy.
Recommended: Get an overview of all the ways you can invest in real estate with our guide.
Educate Yourself on Real Estate Investing
Educating yourself on how to become a real estate investor by learning from every angle. Start by attending local real estate investment groups to learn from others' mistakes and experiences. These will accelerate your learning curve.
TIP: Get your hands on some relevant books and begin watching real estate videos. The more you read, watch, and study, the more you’ll begin to absorb the different languages of real estate investing and start building your own strategies.
Get to know real estate agents and other investors. They can help you learn the local process of a real estate transaction from start to finish.
You’ll also want to get acquainted with banks and lenders, a good title company, and a trusted accountant.
Finally, take the time to learn the real estate investor vocabulary and math. Don’t be afraid to practice calculations. Get familiar with the costs of renovation especially if you plan to learn how to invest in real estate through house flipping or wholesaling.
Determine a Real Estate Investment Strategy
Your real estate investment strategy is where it gets exciting. It will include your primary and secondary focus on how you want to become a real estate investor. There are so many ways to invest in real estate, from hands-on work involving house flipping to totally hands-off real estate investment trusts.
We recommend combining different strategies for maximum earning potential. Don’t be afraid to get guidance and then make your own path on how to become a real estate investor.
Here are the main areas of real estate investing to start determining your personal real estate investment strategy:
Wholesaling Real Estate
Learning how to become a real estate investor as a wholesaler means learning how to scout out properties below market value with motivated sellers. You’ll secure an agreed offer contract with the condition that you have the right to assign the contract to another investor who will take your place.
You make money when you trade places with the other investor. That investor fulfills the contract you created with the homeowner and pays you — the wholesaler — an assignment fee.
In wholesaling, you earn income through the assignment fee. Wholesaling has a learning curve but is an excellent way to invest in real estate without any personal financial investment.
House Flipping
If you want to know how to become a real estate investor in house flipping, know that making money depends on your ability to purchase under market value property and accurately estimate repair costs. Because of this, it’s a good idea to look for an area where homes are selling quickly.
Locating distressed, under market value properties, renovating them, and quickly re-selling them is the basis of successful house flipping.
Buying Rental Properties
A real estate investor working with rental properties purchases and holds properties to generate a passive income. Areas where real estate values are high or rentals are in high demand are good for steady returns on rental properties.
To become a real estate investor when buying rental properties, plan to buy under market to make money upfront.
Double-check your numbers; the rental income should cover the mortgage or debt repayments as well as taxes and a property management company if desired.
If you are able to acquire the property below market value, you have immediate equity in the property. Over time, the property will appreciate and debt service will be paid down, which increases equity. At the same time, you will receive positive cash flow from the beginning.
Get a dedicated bank account designed to collect rent and easily keep track of all the expenses arising from your real estate business. Baselane offers all this with 4% APY and up to 5% cash back.
Multi-Family
Learning how to become a real estate investor in multi-family properties involves investing in anything from a two-unit duplex to a 200-apartment building.
The advantage of multi-family housing is that your rental income is more stable. If one tenant moves out, you still have other rental incomes. You can even live in one of the units, covering your rent through positive cash flow from the other units.
Commercial Real Estate
Commercial real estate is real estate that generates income. Storefronts, malls, offices, and even large apartment complexes are all properties to consider when learning how to become a real estate investor for commercial purposes.
To generate value, purchase residential real estate zoned for commercial use. Renovate the property and either sell or rent it for significantly more as a commercial property. While commercial real estate seems daunting to new investors, it offers a large return on investment and can be done in partnership with experienced real estate investors.
REITs
Real estate investment trusts (REITs) are the most liquid way to invest in real estate because you can buy or sell your shares at any moment, making them a good choice to consider when determining how to become a real estate investor. As a REIT investor, you purchase shares in a REIT on the stock market.
REITs put investor’s money in income-producing real estate. The advantage for investors is that REITs are required to pay 90% of profits to shareholders as dividends, so you will receive regular dividends.
Crowdfunding
Figuring out how to become a real estate investor through crowdfunding is simple: your money is pooled with other investors, and everyone becomes a part-owner. This is one of the most hands-off ways to invest in real estate.
In crowdfunding investing, you could become a real estate investor today with $500 or less. However, you don’t have much control over the project. You are more like a silent investor, but it is a good way to become a first-time real estate investor.
Build Your Real Estate Investing Network
Networking is always important in the real estate world, but it is essential when figuring out how to become a real estate investor. You need to connect with others in the real estate industry and build trust.
The more relationships you can cultivate with everyone connected to real estate, the more opportunities they will send your way. Never discount anyone — you never know when contacts could become buyers, sellers, or private lenders.
People you want to add to your network include:
- Buyers - This includes everyone in your larger community, as well as other investors.
- Sellers - You can reach out to individuals with homes “for sale by owner,” with deferred maintenance, or in foreclosure and offer a quick, no-hassle sale. When you are known in the community, sellers will think of you when they want to sell their property.
- Private Money - Private money means private investors to cultivate in your network. They may be interested in investing in your future real estate projects.
- Hard Money - Hard money means lending institutions such as banks and mortgage companies. You can get pre-approved for a mortgage or loan to close more quickly with hard money.
- Wholesalers - Most wholesalers do a lot of business with other wholesalers. Build your network with wholesalers from the beginning, even if you plan to focus on other areas of real estate investment.
- Bird dogs - Bird dogs can help locate properties ideal for investing. They do the work of locating a property for a set commission or a portion of the profits.
- Investor-Friendly Contractors - These contractors are essential to your success. The contractor's goal is to advise you on rehab, costs, construction, building code, budget, etc.
- Investor-Friendly Title Company - These title companies understand the need for fast, effective information on properties. They’re familiar with different types of closing, funding, and double-closing procedures that investors require.
- Investor-Friendly Real Estate Agent - These agents specialize in working with investors. They’ll help you locate properties and accelerate a fast closing.
- Investor-Friendly Real Estate Attorney - These attorneys know the language of investors and are experts in real estate investment transactions and contracts. When planning to make a purchase or sale, or when preparing to rent to tenants, an investor-friendly real estate attorney will make sure you are legally protected.
Conclusion
Becoming a real estate investor is not a get-rich-quick scheme, but with time, you can build sustainable returns.
Learning how to become a real estate investor involves educating yourself and committing to continued learning, mentoring, and networking to grow your real estate investment business. Since real estate investing depends so much on your network, we recommend always working with integrity and helping others to grow faster and build trust.
Real estate investing is an exciting career opportunity that you can do anywhere in the world, and it requires few personal resources to get started. With experience, there is no limit to how much you can earn — and how much you will learn and grow along the way.
Learn more about the types of loans and brokers willing to work with LLC owners. Read our mortgage guides:
Frequently Asked Questions
Becoming a real estate investor is hard because it challenges you to learn all facets of real estate investing. This includes identifying opportunities, networking, number crunching, document review, selling, marketing, lead generation, business management, and more.
With time, dedication, and experience, you can develop the practical skills and expertise necessary to be successful in real estate investing.
There is no official education requirement to become a real estate investor. You don’t need to have a high school diploma or college degree. You also do not need to have a business, accounting, or law degree to become a real estate investor.
The qualities most important to become a successful real estate investor are a willingness to learn, the ability to check and double-check numbers, research, and network. The more you study your local markets and learn from experienced investors, the more successful you will be.
A real estate investor mentor will accelerate your success. You can learn from their experience and avoid pitfalls. A good mentor will be able to teach you from their years of experience and help you to locate the most lucrative real estate investing opportunities, so you are successful from the beginning.
Especially in your first real estate investment projects, a mentor can help you learn the ropes and make the difference between success and failure. Check out our guide to finding a real estate investor mentor for more information.
