Real Estate Investing Best Practices
If you’re interested in investing in real estate but aren’t sure how to get started, you're not alone. Often, would-be investors know that real estate is a reliable, relatively low-risk way to build wealth but aren’t sure how to initiate the process.
A typical path new investors take is starting small and building capital, then investing in more significant, more passive investment deals down the road.
Here at Redline, we know many investors who started real estate by investing in short-term or vacation rental properties. By starting with a vacation rental or Airbnb in a desirable area, you can enjoy the property with your friends and family while building your capital and gaining valuable real estate experience.
If freedom is one of your top priorities, you’ll, at some point, likely move from active investment projects to more passive investments. For example, vacation rentals often lead to small multifamily properties and ultimately to completely passive commercial real estate syndications.
This is a great strategy, but there are a few things to do before getting started in real estate investing. Keep reading for a quick guide on how to take your first steps toward real estate investing success.
Identify Your Strengths
The first step is to identify your strengths. While this might sound cliche, understanding your strengths and weaknesses is crucial to your success. Everyone has areas where they don’t perform well, areas where they’re average, and areas where they truly excel.
As we all know, when we’re able to focus our efforts on our strongest areas, we perform better and are ultimately more fulfilled. The same holds true for real estate investing.
As an investor, it’s essential to identify your strengths. For instance, if you’re exceptional at seeing potential in properties and creating a renovation plan that brings a diamond in the rough asset to life but aren’t great at executing the plan, you need to focus your efforts where you’re the strongest. In this example, you should stick with finding rundown properties and creating an overall strategy for what needs to happen to bring them to their full potential. Since you’ve identified you’re not the best at executing a plan; you need to have someone on your team who does excel in that area.
Identifying your own strengths is essential, but it’s just as critical to identify the strengths of others as well. As you build a team, everyone will bring their own unique talents and expertise to the table. When everyone is operating from their own personal zone of genius, everyone is more productive and creative, creating a deal that’s ultimately more successful.
Design A Plan
Now that everyone’s strengths and passions have been identified, it’s time to design a plan to bring your real estate investment dreams to reality.
Let’s face it, most of us want to design a life around our personal goals and desires. Real estate investing is a great way to get there.
When designing a viable plan, you must first do your due diligence. A real estate investment plan is not to be taken lightly. You, as the investor, must research what options are available to you, research markets, determine what type of investment best fits your lifestyle and personal investment goals.
Here’s a pro tip, get a pulse on what other real estate investors are doing. By following other investors, you’ll quickly understand what’s working and what's not. Also, be sure to stay up to speed on the current real estate market.
While your plan may involve some trial and error down the road, do your part to establish a viable plan early on before you even need one.
Once you’ve put in the work to create a vision for your life and real estate investment journey, it’s time to get your hands dirty and start taking action.
While this step seems obvious, it can also be the most difficult one to take. It’s not uncommon to get so wrapped up in the research and the due diligence of real estate investing that you suddenly find yourself stuck. You’re doing all the right things but not actually taking any action steps.
A smart way to combat this counterproductive behavior is to set yourself up on a timeline. Starting with research, map out each phase that needs to be completed. Once you have all the stages mapped out, include specific action steps that need to take place. Then, most importantly, add dates to your action steps. When deciding how much time to allow for each task, a good rule of thumb is to create a time frame that’s realistic and doable but also challenges you. You don’t want to make your action plan so comfortable that it doesn’t get accomplished within a reasonable amount of time.
Action, after all, is intended to get you from point A to point B, point A being where you are now, and point B is the lifestyle you’re dreaming of. The quicker you take action, the sooner you start progressing toward your real estate investing goals.
Propel Yourself Forward
Investing in real estate can feel overwhelming, even intimidating, especially if you’re new to the process. However, it’s important to remember that progress doesn’t have to equal perfection.
To make forward progress, you have to trust yourself. You have to trust your strengths and your instincts. As time goes on, you’ll start feeling more comfortable in your new role as a real estate investor, but until then, it’s up to you to continue to propel yourself forward.
Remember, your first few real estate investments will likely be a work in progress. You’ll quickly figure out what works and what doesn’t. Then, as your expertise grows, you’ll know how to adjust your deals and your overall vision accordingly.
By creating a vision, starting small, and taking action, you can develop a cycle of investments that you can enjoy, while living a meaningful, intentional life as you build your wealth.