5 Steps to Kickstart Your Real Estate Investment Journey
Have capital to deploy because you don’t want it wasting away in your bank account while inflation takes an ax to it each month? Maybe after saving for a few years you finally have money to buy your first rental. Or maybe you own a house already but want to move and turn the old house into a rental, investment property.
I want this to be more helpful to you if you’re just starting out, so I won’t make a cliche list like… “Step one: find a good real estate agent.. oh hey, I’m one!”
Step 1: Financial Groundwork
Budgeting and Planning: Create a detailed budget that includes all potential expenses. Factor in unexpected costs and ensure you have a financial cushion. What does a “financial cushion” look like? Withhold ~15% of your monthly rent to account for maintenance, repairs, vacancy, and capital expenditures.
Financing Research: Thoroughly explore different financing avenues. Understand the pros and cons of each, from traditional bank loans to real estate crowdfunding platforms. Consider speaking with a financial advisor to align your investment strategy with your overall financial goals. A lender would be the next call to have to see what you can qualify for. If you’re qualified for a 200k duplex in Tampa, unfortunately you’re not ready to invest yet. You need more capital.
Step 2: Define Your Investment Goals
Specific Objectives: Define what success looks like for you. Is it achieving a certain ROI, acquiring a set number of properties, or generating a specific amount of passive income? Everyone has a different metric that they want to hit for each month, year, 10-year period. Are you looking for a house, condo, mobile home or duplex? This will immensely help you and your agent - if you choose to work with one. Changing this up too frequently can burn you out and you will constantly see other investments as the “grass being greener”.
Investment Horizon: Decide if you’re in for the long haul or looking for quick flips. Your time commitment will dictate your strategy, whether it's renovating distressed properties or investing in turnkey rentals.
Step 3: Dive into Education
Comprehensive Learning: Go beyond the basics. Study market trends, corporate market research (see my last post), investment strategies, and property management. Familiarize yourself with industry jargon and investment models. ROI stands for return on investment. SFH is single family home. SFR is single family rental. STR is short term rental. Etc
Resource Utilization: Leverage online courses, real estate podcasts, and books written by successful investors. Attend local real estate seminars and workshops to gain practical insights and firsthand experiences from professionals. Don’t spend a bunch of money here. Those $1,000 courses are probably not worth it.
Don’t “Deep dive”: Don’t get stuck in analysis paralysis. This is REAL. No one wants their first investment to be a failure, so often we keep in this zone and never move out of it.
Step 4: Market Analysis and Selection
In-Depth Market Research: Analyze demographic trends, employment rates, and future development plans in potential markets. Look for signs of growth and stability.
Risk Assessment: Evaluate market volatility and potential economic factors that could impact your investment. Consider both the short-term and long-term implications of investing in a particular area. Are you going to long term rent, short term rent, or rent by the room? Different markets have different regulations and it’s impossible for you alone to research the details of every market by yourself. Which brings me to…
Step 5: Build Your Support Team
Seek Professional Help: Connect with experienced real estate agents, brokers, attorneys, and accountants. There are pros and cons to working with agents, but I think they vastly outweigh any cons if you’re new to a market.
Network: Engage with fellow investors for advice, support, and potential collaborations. If you’re out of state, this may be hard, but look to forums like Bigger Pockets and try to comment and post once a day.
I hope you’ve gained something here! By following these five first steps, you can jump through the initial stages with confidence and build a strong foundation with for your first investment. If that’s you and you’re ready to invest in Tampa bay.. here’s the cliche coming back around. I’m here! Book a call with me here.
