There are thousands of real estate investors in the U.S. As one indicator of the size of the real estate market, there are nearly 20 million rental properties in the U.S. and about 70 percent of them are owned by individual investors according to Census data. Investing in real estate can offer significant benefits but it requires planning, preparation, and a serious business mindset.
The Benefits of Investing in Real Estate
While this type of investing can offer significant benefits, as with other types of investing, there are risks, and positive results are not guaranteed. The benefits start with the potential for steady income from rent payments. Real estate is a long-term investment so property appreciation over time can enable a future sale to achieve great returns. This investment avenue offers tax benefits because many expenses involved in owning investment properties can be deducted including property taxes, management fees, property insurance, maintenance costs, and marketing costs. It provides the ability to diversify one’s investment portfolio, and it offers the benefits of leveraging funds used for the purchase of real estate properties. It also provides long-term security and protection against inflation.
11 Tips for First Time Real Estate Investors
- First, make sure that real estate investing is for you. It requires serious investments in capital, time, and attention. There will be a steep learning curve early on, so be prepared to deal with new experiences and challenges.
- Depending on one’s financial situation, investing in real estate may require an investor to learn how to make sacrifices in time, financial choices, and other opportunities.
- Be prepared by getting your own finances and credit history in order.
- Getting started in real estate investing requires an investor to research and understand the industry, its terminology, rules, and practices.
- Connect with local investors to gain valuable insights from them. Additionally, develop a mentoring relationship that will help you along your learning curve.
- Develop a business owner mindset. That means looking at each investment opportunity using a deliberate and rational assessment.
- Know and work with the investment numbers. First, establish your investment criteria and determine your desired rate of return. Then, determine the potential profitability of a property by calculating its acquisition and rehabbing costs and its potential rate of return.
- Get to know your market so you can make a good judgment about the potential of various locations to deliver a good return. Then, scout for a good location.
- In the beginning, it is important to start small and build on your experiences and successes. Know and master the processes first before expanding the scope of your investments.
- Create solid operating systems early on.
- Know that cash is king. You must have good financing to make the numbers work and constantly manage cash flow.
Seek Expert Financing Assistance
Contact CapitalAx Commercial Lending, based in Lubbock, TX to get the financing you need to establish and grow your real estate investing business. We offer a wide range of commercial finance programs to help you achieve your goals.