what is a real estate investor

How To Become a Real Estate Investor: A Beginners Guide

Elena Hudgens
By Elena Hudgens 15 Min Read

The housing market has been on an upswing for some time now. And if you’re thinking about investing in real estate, this might be the perfect time to get started.

But where do you start?

What is a real estate investor?

What’s the difference between flipping houses and purchasing rental properties?

How much money will I need?

These are all questions that people considering real estate investments have. And while they may seem daunting, the following makes it easy to understand what you need. Read on for a guide that will answer your questions and help you decide if investing in real estate is right for you.

What is Real Estate Investing?

Real estate investing has been around for centuries, but it’s never been more popular than it is now. Investing in real estate means purchasing property and renting it out to tenants. It can be a lucrative venture when done correctly.

You won’t have to worry about sourcing new tenants or maintaining the property yourself in the initial days.

You’ll need to oversee the finances and collect rent checks every month until you sell the property at a profit. However, there are some downsides to investing in real estate: an investment in real estate would probably take up your entire savings if you don’t have any experience with this sort of thing. You also have to consider repairs and other maintenance costs that may arise. So read on to understand what is a real estate investor and how you can become one.

How Much Money Do I Need to Start Investing in Real Estate?

The amount of money you’ll need to invest in real estate will vary depending on the type of property you’re looking into and where you’re looking. For example, the average cost to invest in a single-family home is $120,000, while investing in a duplex is $35,000.

So how much money do you need? The answer depends on your investment strategy. Suppose you plan to purchase properties and rent them out. You’ll likely need more money than if your goal is to flip houses. Typically, this means that renting properties requires an initial cash Down payment of 20% and flipping requires initial cash down payment of 5%.

If you want to purchase rental properties and put down 20% upfront, then that means that you’ll need around $24,000 for a single-family home and $9000 for a duplex. But what about flipping houses? If your goal is to flip houses right away and put down 5% upfront (or $4000), then your starting point will be around $1000. 

So how much money do you need? It all depends on what type of real estate investment strategy sails your boat.

Does Real Estate Investment Require a Degree or Certification?

You don’t need a degree or certification to invest in real estate. You’ll want to make sure you’re well versed in the industry’s basics, which could include projects like flipping houses and purchasing rental properties. Many online resources can teach you about different aspects of investing, from finding a property to renovating it.

To take on the job of a real estate investor, you need a significant investment in any real estate, and you’ll also need a hefty amount of cash on hand. It’s because there’s always a risk involved when investing in a property. There will be times when you have no income coming in from your investments. So it’s essential to have some money saved up, just in case.

What are the Requirements for Real Estate Investment?

Before you invest in real estate, it is crucial to understand what investment strategy will work best for you. Flipping houses is a short-term strategy that involves purchasing a property to sell at a profit within two or fewer years. Buying rental properties comprises purchasing and renting a property for an extended period.

While there are no set qualifications for real estate investments, most people choose to purchase rental properties because the return on investment is high. It’s because rental payments are often greater than mortgage payments, meaning more money for real estate investors.

Should I Get a Lawyer and Property Manager on My Team?

As a real estate investor, you need a property manager and lawyer. They will work together to ensure that your investment property complies with local and state laws. Whether you’re flipping houses or purchasing rental properties, the property manager will help you collect rents, handle repair requests, and maintain your property. The lawyer will work with you to draft an agreement that sets out the terms of your partnership with your property manager.

You may choose to hire a lawyer and a property manager individually. But this can be expensive and time-consuming if they don’t share resources. If you decide not to hire a lawyer and property manager as a team, it’s essential to make sure they communicate well and stay up-to-date on state or local law changes.

What Types of Property Should I Buy as an Investment?

The first question is the type of property you are interested in buying. Are you thinking about buying an income property for rental purposes? Are you considering flipping a house?

If you are looking for rental properties, purchasing a multifamily residence might be right. You can buy a multifamily home with four or more units and then rent out the other three or four units to tenants. This passive income will give you a steady monthly income from your investment.

Purchasing a multifamily home also allows you the option of living in the unit, saving on costs. However, if this isn’t something that interests you as a real estate investor, don’t worry—you can also purchase single-family residences. The same tips apply for investing in either type of property—research the market, do your homework on what’s happening around the area and make sure that your renovation plans are workable before proceeding with anything.

Single Family Homes

When you’re only purchasing a single-family home, you will not need as much money as if you wanted to buy a duplex or other type of property.

You’ll also be able to make the updates and changes you want with this type of property. However, it’s important to remember that single-family homes won’t make as much money as duplexes and other properties for rental purposes.

The average cost for a single-family home is $250,000 – $350,000. The monthly mortgage payment on a $250,000 house is around $1,250 per month (assuming 20% down). Also, the monthly mortgage payment on a $350,000 home is approximately $1,500 per month (considering 20% down).

If you plan on flipping the house once it’s ready for sale, remember that there are costs associated with buying and selling homes (e.g., closing costs). Typically, this will run about 6-8% of the selling price.

Duplexes, Triplexes, and Fourplexes.

Duplexes, triplexes, and fourplexes are single-family dwellings that people can rent out to tenants. These properties are typically better for rental investment because they offer more units per acre of property.

While duplexes are traditionally structured, triplexes are separate buildings on the same lot with two units per building. Fourplexes are also two units per building but on different lots.

Owning a duplex or triplex is cheaper than owning a single-family home for about $500,000. But these shorter buildings may not be as aesthetically pleasing to potential renters as detached homes might be.

An advantage of duplexes is that they often have one parking space per unit. While some detached homes only offer one parking space for the entire house. It makes it easier for newcomers to get on their feet when renting multiple units at once.

Pros of investing in property

The most significant benefit of investing in property is that the return on investment can be potentially high. A $200,000 property could yield a profit of $30,000 per year. However, it also requires a significant investment and expertise to invest in real estate.

Real estate investors can take advantage of several opportunities where other kinds of investments don’t have access. For example, real estate investors have access to tax breaks, interest rates, and refinancing options.

One downside of investing in property is that the market can fluctuate abruptly. However, this isn’t necessarily bad for those knowledgeable about the market and time their ventures accordingly. Another potential upside is that real estate investors have complete control over their investment—no one else has any say in what happens with it!

Investing in property requires some risk—but if real estate investor has done their research and knows how to manage their risks effectively, then they’ll be able to reap high profits from this venture as well.

Cons of investing in property

One of the significant drawbacks to investing in property is that it’s difficult to calculate the ROI. The amount you invest, how long you’re invested in, and how much rent you’re able to charge are just a few factors that need to be considered when trying to determine the profitability of your property.

Another drawback is that if you’re not careful, you could lose out on more money than expected. 

Many real estate investors face one problem: they don’t have enough money saved up for the initial investment required. If this is the case, you’ll need a bank loan or personal loan to purchase any property.

It’s also important to consider what kind of property will work best for your investment plan. There are four different properties: commercial, industrial, residential and land development. Each has its pros and cons, depending on what you’re looking for in an investment opportunity.

Tips for Real Estate Investors

Some tips for real estate investors before starting the venture- 

1. Have a plan

Be sure to know what you want out of your property and how much you might expect to make from it in the future. It will help you initially decide if this is the investment for you because it will inform how much time, money, and effort you should put into it.

2. Be selective.

If there are too many properties on the market, or too many investors looking to buy a property, then it may not be worthwhile for you.

3. Find an area where there’s demand.

Competition can drive prices up, so make sure that an area is still high in demand before deciding to invest.

4. Don’t overextend yourself.

It saves money in the long run not to buy over one property at a time, especially when purchasing them with cash rather than financing through a bank loan or other source. Buying too many properties at once could lead to financial difficulties and losses down the road.

5. Stick with what works.

If something isn’t working for your investment, consider whether it’s worth continuing with that strategy or if something else would work better for your situation and goals. And most importantly, know how to negotiate effectively.

Conclusion

So did you find out what is a real estate investor? And if you want to become one?

Becoming a real estate investor is a viable way to make money. The downside, of course, is that you have to put in a lot of work. You will need to learn about the ins and outs of the real estate market, set up a company, find properties to purchase, manage those properties, and keep tabs on what your tenants are doing.

But if you are looking for a way to make money without having to work for someone else, this may be the right choice for you.

Read More: What It Takes To Be Successful: Tips From Sally Brown Real Estate Entrepreneur

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Posted by Elena Hudgens
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Elena Hudgens is an entrepreneur with 10+ years of experience. She started her journey by building her own e-commerce website on Shopify and turned her $1000 savings to millions in just 2 years. Soon she started different ventures in which she failed and succeeded. And now, she's on a mission to help other entrepreneurs with her life and business lessons.
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