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C-Note: How to Invest in Real Estate: A 7-Step Beginner’s Guide

By
Real Estate Broker/Owner with Charles Stallions Real Estate Services 610125

Investing in real estate may seem as simple as buying a property and collecting money, but it is far more complicated than that. Don’t stop reading, though. I said it was complicated, not impossible! This beginner’s guide will help you understand how to invest in real estate successfully, one step at a time. While The Close likes to keep our articles short, this topic needs more explanation, but trust us; it will be worth your while 😉. 

Jealie Dacanay

Jealie Dacanay

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Key Takeaways:
 
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Take your time to research the market before you invest.
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Diversifying your real estate portfolio to lower risk is a good idea.
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Keep an eye on cash flow and expenses to make sure you’re making a profit.
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Build a network of reliable professionals like real estate agents, contractors, and property managers.
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Stay updated on local and national real estate trends and regulations.
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Understand the tax implications and maximize any available tax benefits.
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Have a clear investment strategy and long-term goals before purchasing.

Step 1: Create a Strategic Investment Business Plan

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Creating a detailed investment business plan is the first step in determining how to invest in real estate. This plan should outline your strategy, goals, target markets, and types of investments. It should also include financial projections, expected returns, timelines, and risk management strategies. Analyzing market trends and competitive positioning is also essential. A well-structured plan will guide your decisions and attract potential partners or investors.

You want your investment plan to be as specific as possible so you can determine the best methods to reach your goals. To be exact, you need to make sure you have a strategy for your properties and outline your target goals to achieve the strategy. 

  • Buy and hold: This real estate investing strategy involves keeping properties long-term.
  • Fix and flip: This involves buying a property that needs improvement, repairing it, and selling it for a profit. 
  • Turnkey: A type of investment property that doesn’t need any work, has tenants in place, and sometimes includes property management services.
  • Real estate investment trust (REIT): REITs are paper assets that trade on the stock market. They’re an excellent way to invest in real estate without owning property needing maintenance and tenants.
  • Buy, Rehab, Rent, Refinance, Repeat (BRRRR): When you buy a property, fix it, rent it out, do a cash-out refinance, and use the money to buy the next property. It’s an excellent real estate investment strategy for portfolio growth.
  • Crowdfunding: Real estate crowdfunding is when investors pool resources and invest in projects such as new developments or acquisitions. It usually doesn’t require a lot of capital, and you can cash out in two to five years on some deals.
  • Wholesaling: With this strategy, you don’t own the property. You find a property you can buy below market value, put it under contract, and sell it to an investor for a profit. The key here is finding deals where the seller, wholesaler (you), and investor all win.
  • Fractional ownershipSimilar to a timeshare, fractional ownership is when investors each own shares of a property and its benefits and responsibilities. 

Are you not sure what strategy is best for your business? Check out our article 8 Types of Real Estate Investment

Step 2: Start a Holding Company

Next up, you’ll have to set up a holding company. This parent company can own and manage other businesses or assets. It’s a good idea to look into the legal stuff you need to do to create a holding company in the area you’re interested in. You’ll have to decide on a business structure, like an LLC or a corporation, and then get all the necessary paperwork filed.

Next, draft an operating agreement that outlines your company’s purpose, structure, and governance. Consider how your holding company will manage its subsidiaries with financial oversight and strategic direction. Consult legal and financial advisors to ensure compliance and maximize tax benefits. Once established, your holding company can provide advantages like organizational flexibility, better asset protection, and increased financial leverage for future ventures.

Step 3: Find Investment Properties

Inventory has hit an all-time low since the pandemic, so finding real estate investment properties is difficult. However, there are several ways to scout out some good deals. It may take more work, but once you start building a portfolio of cash-flowing properties you appreciate, you’ll agree it’s worth it. Here are some strategies on how to find investment properties:

  • Cold-calling: Find names of rental property owners by looking for tax records. Once you know who owns the property, you’ll have to do some sleuthing to find phone numbers. If the property is under a business entity, like an LLC, you can check with the Secretary of State corporate division for their filing information. You can also search Google or ask a tenant for their contact info.
  • Joint venture partnerships: Most investors have looked through online listings and are searching for off-market properties to find good deals. Expand your reach by partnering with real estate agents and passive investors by having them locate off-market properties. If you flip the property, you can pay them from the proceeds. If you hold the real estate in a portfolio, pay them a finder’s fee.
  • Tax liens and auctions: Search for tax lien sales and foreclosure auctions. Do your due diligence on the property and arrive ready to bid.
  • Postcards and direct mail: Canvas a neighborhood or owners of specific properties by mailing postcards or a letter indicating your interest in buying their property.
  • Listing websites: Sites like Zillow, MLS, Realtor.com, and LoopNet list properties for sale. They also allow you to search recently sold properties to understand property values.
  • Real estate agents: Let real estate agents know you’re in the market for investment properties and tell them what types of properties you want to buy, how much you can afford, and building criteria.
  • Partner with other investors: Attend investor groups and look for investors who wish to partner with someone. Thoroughly vet a potential partner to ensure they have some experience and resources and create a detailed partnership agreement that specifies roles, responsibilities, and exit strategies.

Why Choose Charles Stallions?

Since 1995, with Charles's experience and certifications like Certified Residential Specialist (CRS)Certified Buyer Expert (CBR), and Senior Real Estate Expert (SREE), Charles Stallions has helped thousands of families achieve their real estate dreams. Whether buying your first home or upgrading to your dream property, Charles is here to guide you.

www.charlesstallions.com

 

Ready to Take the Next Step?
Whether you’re buying, selling, or exploring the local market, let Charles Stallions guide you every step of the way. Call or text today at 850-476-4494 for expert advice you can trust.

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