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5 Tips for Success for New Real Estate Investors

Top 5 Tips for New Real Estate Investors

Getting started in any investment strategy can be overwhelming and confusing. Learning about stocks, index funds, gold, or real estate can be daunting for new real estate investors in Nampa, Idaho or anywhere else. Today, I want to give you five tips to set you on the right path to building your wealth through real estate investing.

Pick up any wealth magazine or periodical, and real estate is a common thread among high-net-worth individuals. But how did they get started? Well, that is what we are here to discuss.

Education Is King

Before making a move, immerse yourself in learning about real estate investing. It’s more than just learning math. Start by learning the terminology. Knowing the correct vocabulary to communicate your goals makes navigating the investment process easy.

Learn about investment real estate strategies like house hacking, fix n’ flip, and the BRRRR method. See which one fits your financial goals best. Pick the brains of friends or acquaintances who have started their journey. Consider finding a mentor to work closely with. You will be surprised at what you learn and the mistakes you can avoid by starting your journey with these three things.

Establish a Plan

What is your goal, and what is your plan to achieve it? Start by making your goals SMART.

SMART goals are specific, measurable, achievable, relevant, and timely. Think about where you want to be financially at the end of one year, five years, and retirement. How many properties do you want to own? What kind of return do you want from these investments? What is your exit strategy?

Once you set your goals, both short-term and long-term, put a plan in place to achieve them. If you don’t own a home, how do you plan to buy your first one? Can you afford it by yourself? Do you need help with the down payment? Can you house hack?

If you own a home, can you buy another or rent yours and move into the next one? What kind of property will you purchase: a condo, a duplex, a fourplex, or a multifamily? Will you manage it yourself or hire a property manager? Will you buy local, or is your market out of your financial reach?

These questions are essential to consider before making that first move.

Understand Risk

Morgan Housel, the author of “The Psychology of Money,” says you must pay the price when you invest. Nothing in life is free, and real estate investing is no exception.

What happens when things don’t go according to plan? You get a bad tenant or a bad property manager. Or the HVAC goes out after closing. These are all risks you take on when investing in residential real estate. Preparation through a good plan is crucial, but you must be more immune to these risks.

You must understand how these risks affect your life, family, and other real estate investors. Can you weather the storm? Most investors need to pay more attention to the amount of risk they can withstand. They must realize that navigating real estate’s ups and downs is part of the journey. If something goes wrong, they want to quit, possibly ending their trip with a significant loss.

Remember, when you start, you are inexperienced and likely to make mistakes. Translation: You are taking a greater risk to yourself. Start small and move to more enormous investments once you have more experience.

Diversify

When starting out, it is essential to avoid investing all your money in just one thing. Look at all your options and strategize how to mitigate overall risk. You can diversify by asset class: condo, single-family, duplex, fourplex, land, commercial, or multifamily.

Similarly, you can do it by location: out of state or outside your immediate area. Also, consider rental strategy: long-term, mid-term, or short-term. Diversify your leverage options: traditional lending, hard money loans, or joint ventures.

Real estate investing offers many options for diversification. It might also be wise to invest in other assets, like gold, the S&P 500, IRAs, or 401(k)s. The point is not to put all your eggs in one basket.

Reassess Your Plan Often

Refrain from being so inflexible that you can’t adjust your plan when circumstances change. Certain factors can cause you to exit a property sooner than planned.

For example, I recently chose to sell a California property intended for long-term investment. Cities passing ordinances or legislation unfavorable to your rental business can force reconsideration. Neighborhood crime, population declines, or significant employers leaving the area can negatively impact your investments.

Conversely, your current plan might not fit your newfound love of travel. You should exchange a slow-growing investment plan for a more aggressive one. Whichever way your circumstances lean, reassess your investment plan often and change directions if needed. A “set it and forget it” approach to building wealth can serve you well in appreciation. But not checking on what’s in the pot will likely result in missed opportunities.

Final Thoughts

If you’re ready to succeed as a real estate investor, please contact us today. We are excited to partner with you on your investment journey!

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