Real estate is often the market of choice for many beginner investors. Real estate is a well established market that is accessible to anyone without requiring expert knowledge. As a result, the average homeowner prefers to invest in property first. However, the seeming ubiquity of real estate investments leaves the door wide open for making mistakes, especially by beginners. So if you are a new investor with the eye on the property market, here are several important tips to follow:
1. Expertise Unnecessary, but Research is a Must.
If you invested in the stock market, you will need to know a thing or two about trading stocks and algorithms. You do not need such technical knowledge to become a real estate investor. But you should not interpret that fact as a reason not to do research. Even if you don’t need to know the algebra behind the market, you do need to know what’s propelling the market. Read real estate news and keep track of property and related stock values. You will also need to do research on properties as well, such as learning about backgrounds and the neighborhoods they are located at. Such information is crucial to making a good deal.
2. Consider Direct Ownership vs. Buying Shares
Direct ownership of property is the conventional method for investing in real estate. You buy a building then rent it or sell it at a higher price. Doing so requires a lot of work and responsibility. Most new real estate investors are not established enough to flip properties on the market. Those that choose to lease or rent will also need to keep up with serious legal responsibilities. If you are not ready for this level of commitment, you should consider investing in a REIT. Basically, with a REIT, you will be buying shares on multiple properties owned by other people. You do not have to worry about maintenance costs, legal fees and such that property owners have to worry about. Therefore, a REIT is always a good option for those who are just starting out as real estate investors.
3. Delay Big Purchases
As mentioned above, direct ownership of property requires a lot of work. You may not be ready for such work yet. Therefore, it’s not wise to spend all your money and buy a massive building the moment you become a real estate investor. Do not make any big purchases for at least the first two years. Spend some time getting to know the market before you dedicate all your finances to it.
4. Build Relationships
Investing is all about networking. You cannot know which properties are lucrative and which are not without being friends with market insiders. So, make friends with other real estate investors, agents, brokers and related parties. This is the only way you will know what’s about to go down in the market. Your network will also be able to warn you of possible scams and spurious agents in advance.
Also, don’t forgo writing down a business plan. It will keep your financial goals in focus.
Investing in real estate can only be lucrative if you are smart. Otherwise, you will just lose all your money on a bad deal. Therefore, pay close attention to the advice given above.