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13 Ways to Succeed as a New Real Estate Investor

By Christy Bieber - Aug 4, 2022 at 9:10AM
Real estate agent talking to a couple and showing them a property on a tablet computer.

13 Ways to Succeed as a New Real Estate Investor

Investing in real estate can be a smart financial move -- if you do it right

Investing in real estate has many advantages. You can diversify your portfolio and develop multiple income streams. But it takes a lot of effort and knowledge to be successful at it. If you're just getting started, following these 13 tips can help maximize the chances that real estate investing will pay off for you.

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1. Determine how much cash you have available to invest

One of the first questions to ask yourself is how much money you can put into your real estate investments. This question is important because some investments require much more money up front than others.

If you hope to buy rental properties, for example, you will need a down payment, which could total tens of thousands of dollars. But if you want to invest in real estate investment trusts (REITs) or real estate exchange-traded funds (ETFs), it will take very little cash to get started.

ALSO READ: Here's How to Get Started in Real Estate Investing on a $50,000 Salary

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Person standing in front of For Rent sign in front of house.

2. Evaluate your strengths and weaknesses

You'll need to think about your individual skills when deciding what kinds of real estate investing will work for you. For instance, if you hope to flip houses, you'll need solid project management skills and some do-it-yourself (DIY) talent to keep costs down. On the other hand, if you're going to manage rental properties, you'll need people skills to deal with tenants and knowledge of how to market your properties.

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Paper that says Your Credit Score is: 730.

3. Take a close look at your financial credentials

If you want to buy properties, a good credit score and low debt-to-income ratio will help you qualify for affordable loans to purchase them. While there are other investment options for people without a good credit score, you may want to work on improving these metrics if necessary so you have more investment choices available to you.

ALSO READ: Can You Invest in Real Estate With a Low Credit Score?

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4. Evaluate how much time you can spend managing your investments

Some types of real estate investing are very time-intensive. For example, if you're going to own properties you rent out to tenants, you'll need to spend time showing the spaces to potential renters, conducting background checks, collecting rent, and fixing problems.

While you can hire a property manager, this eats into your profits -- and it still takes time to find the right company and ensure they're living up to your expectations.

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Person sitting at table and calculating finances.

5. Learn about your investment options

You'll want to consider all the different methods of investing in real estate, so you can make an informed choice about what's right for you. You could, for example, buy multifamily homes to rent out or purchase commercial or industrial properties; you could invest in properties like storage facilities, senior housing, and others; or you could purchase properties to rehabilitate and resell.

And if you want to gain real estate exposure without actually owning physical properties, you have other options, like REITs or ETFs.

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Landlord-Tenant Law book with a gavel resting on top.

6. Learn the rules and regulations

Real estate is a highly regulated industry, and you need to understand the rules before you dive in. For instance, if you're purchasing a property, it's helpful to know zoning rules so that you understand what you're allowed to do with it. You should also know landlord-tenant law, so you are fully aware of your obligations once you have renters living in your space.

ALSO READ: Don't Fall for This Alarming Real Estate Myth

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7. Decide on your investing strategy

After researching your options, considering your strengths and weaknesses, and learning the rules, you can decide what types of real estate investments are right for you. Choosing the right investing strategy can help set you up for success since your choice will be tailored to your skills and current financial situation.

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Adult concentrates while reviewing paperwork in underlit office space.

8. Learn the market

If you're planning to buy individual properties, you will want to learn about your local market. It's important to buy a property at a reasonable price and ensure there is sufficient demand for rentals in the area.

A deep dive into market conditions will help you make the right choices so you don't overpay or find yourself unable to find tenants.

ALSO READ: Here's an Absolutely Brilliant Way to Invest in Real Estate

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A blue sign that says Risk Ahead.

9. Understand the risks

No matter what type of real estate investments you make, there are risks associated with putting money into this asset class. You'll want to be realistic about what these risks are up front so that you can mitigate them, be prepared for what could go wrong, and have a plan for dealing with problems when they arise.

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Chart showing spiky line trending up and to the right with numbers in background.

10. Set realistic expectations

Some unscrupulous individuals make faulty claims that investing in real estate is a way to get rich quickly. The reality is that it can take time and hard work to earn a substantial profit from real estate investing. You'll want to be sure to set realistic expectations so you aren't discouraged and don't find yourself over-leveraged and without sufficient income to maintain the properties you own.

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11. Diversify your investments

Like with any type of investing, putting all your eggs in one basket can be risky. Look into investing in different kinds of real estate so you can build a diversified portfolio.

REITs and ETFs provide more diversification because you'll be invested in many different properties when you buy either. But if you're purchasing individual properties, you are betting big on those buildings performing well for you, a riskier strategy.

ALSO READ: Understanding Portfolio Diversification

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A crossroads sign points in one direction for profit and the other for loss.

12. Track your profits and losses

Successful investing requires tracking your progress to see what's working and what's not. Keep track of how your investments are performing so that you can tweak your portfolio and you can be prepared to comply with tax rules.

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13. Get the help you need

Finally, consider getting help from qualified professionals who can assist you in dealing with the complexities of real estate law. A good accountant, for example, can help you take full advantage of the tax breaks available to real estate investors.

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These tips can help set you up for success

Following these tips can help set you on the path to success. It takes effort to learn the ins and outs of real estate investing and to decide which approach works best for you. But it's worth putting in the time to get exposure to an asset class with a proven track record of helping investors build wealth.

The Motley Fool has a disclosure policy.

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