We’ve put together some of our favorite tips for beginner real estate investors, to help you start property investing on the right foot.
Have you heard these tips before?
1. Invest in the fundamentals
When choosing which area to invest in, you need to make sure it has a strong tenant demand – not just now but in the future. How can you do that? By looking at the “fundamentals” of each area.
When assessing an area, look for the following:
- Shops – are they local and plentiful?
- Transport links – are there good road networks, train links and buses?
- Schools – are they local and of a good standard?
- Investment – any future plans?
- Employment – who is likely to employ your tenants?
Don’t rely on just one or two of the fundamentals – make sure you look for them all. You might be able to find a good deal in Nowhereville, but who will rent it from you?
Why does location matter so much in real estate? Read to find out!
2. Account for your time and energy as well as your costs
One of the golden rules of investing in property is to monitor your costs – and to make sure that financially speaking, you get more out of your investment than you put in.
Property costs are calculated in more ways than one, though. Each property you own will take some of your time – to source, purchase, rent out, etc. – and some of your energy. Some will have higher “costs” than others.
Is the financial return worth the time and energy cost? You can get money back, but never your time or energy.
Related post: How to invest in property when you have no time.
3. Network with other investors
As an introvert, the idea of “networking” brings me out in a cold sweat: I associate it with name badges, fear, and being backed slowly into a corner while someone aggressively pitches me on whatever it is that they do.
In reality, networking doesn’t have to be like that: it’s a great way to increase your success in property, and (I can’t believe I’m saying this) it can even be fun.
Having a network means having people who can put deals your way, who can recommend the best professionals to work with, and to whom you can turn when you’ve got any kind of problem. My own network has created tens of thousands of pounds for me in opportunities created and costs saved – and building that network hasn’t even felt like work.
We hold multiple monthly events around the country, which are guaranteed to be friendly, informal, and with no sales pitches whatsoever.
Still, you don’t have to go to any kind of event: just find an investor you admire and offer to buy them lunch in exchange for a chat. Most investors are happy to talk about what they do and share advice.
4. Don’t spend a fortune on property education
When the property market is booming, you’ll find plenty of courses promising to educate you about property investment. Often the initial event will be cheap or free, with an “upsell” to an expensive course where you’ll learn the “real” secrets.
In truth, there are no real secrets – you can learn almost everything you need to know cheaply (like from one of our books or from experience.
This isn’t to say that all courses are useless: there’s a motivational benefit, and there are excellent courses on specific aspects of property investment taught by experts in their field.
But don’t feel like you’ll miss out on any secrets if you choose the cheap or free route – there’s still an endless amount you can learn, and you’ll have more in the bank for your next deposit.
5. Don’t go alone – build a team
Property investment requires so many different skills – financing, sourcing, strategy, conveyancing and DIY to name a few – and chances are you’re not an expert at every discipline!
That’s why it’s important to build a team: you can focus on doing what you’re good at, and you can leave other people to do the rest. Your team should be able to save you time and money, and help you to accelerate your success.
Depending on your strategy, you should look to have most of the following people in your team:
- Mortgage broker
- Sourcer (company or individual)
- Mentor (this can be a formal or informal)
- Handyman or builder
Consider asking for referrals to give you peace of mind that you’re picking the right people.
6. Think about your exit from the start
You might never want to sell your properties – and there’s nothing to stop you from keeping them forever and then passing them on to your children. But you never know what the future holds: there might be a time when you need to sell, when you want to free up capital for another investment, or when a property just doesn’t fit in with your strategy anymore.
For that reason, even if selling isn’t part of your plans, it’s a good idea to think about your exit strategy before buying any particular property. In other words: if you decided you didn’t want to own the property anymore, how easy would it be to sell it to someone else for a good price?
Properties that can be tricky to exit from are:
- Properties of non-standard construction, which will often restrict you to cash buyers.
- Small studio flats or student pods, which you can normally only sell to other investors – who will always want a discount!
- Properties in deprived areas where there’s a limited owner-occupier market, again meaning that you will have to sell to an investor.
All of these types of property might fit your strategy and generate a good yield, but before you buy consider if you’re comfortable with the possible implication if the time comes to sell.
7. Focus on capital growth – not just rent
Newbies to property investment typically make the mistake of trying to become wealthy through rental profits. However, this is inefficient and hard to achieve.
Let’s say you want to earn £100k each year from your property portfolio – which breaks down to £8,333 per month. How many properties would you need to invest in to realise that profit?
Using a realistic example, let’s say you buy properties at £150k each, and they give you a positive cash flow of £200 per month (per property) after costs. You’d need 41 properties to hit your target – that’s a lot of properties to fund (£6.1m worth) and then manage!
The people I know who’ve become wealthy through property have achieved it through growth rather than rental profits.
Related post: How property will make you rich in the long term.
Keep these tips in mind
A novice investor may struggle as they try to navigate through the complicated world of real estate investing and purchasing investment properties.
Following these simple tips to get started in real estate investing will keep your head straight and take the emotion out of buying real estate for investment properties.
Now that you are ready to start investing in real estate…
Start finding great investment properties on the AQRE Home platform!
AQRE Home offers everything you need to make your dream investment a reality. Including:
- hand-picked investment properties
- mortgage broker connections
- a build-in messenger for easy offers
- realtor connections across the U.S. and Canada
- expert guidance from a team with 20 years of combined real estate experience
So start browsing and sending offers today on AQRE Home.