If you are wondering how to start a real estate business to make money in the short and long term, you’ve come to the right place.
In this article we will walk you through the 8 steps for getting into real estate investing. The tips and advice presented here will help even first-time investors make profitable decisions. Buying a lucrative investment property is just a few steps away.
To learn even more on this topic, watch our real estate video available below:
Get Educated in Real Estate Investing
A great thing about real estate investments is that they don’t require a lot of expert knowledge to succeed. However, you do need some knowledge to get started.
In this regard, the sky is the limit. You can choose to take in-class or online real estate courses. Nevertheless, if you don’t want to spend a lot of money on this and don’t want to be bound to a certain time of the day, you can learn about real estate investing on your own.
With the myriad of real estate sites out there, you can find various blogs, real estate podcasts, videos, webinars, and all sorts of other educational materials.
If you are an absolute beginner willing to cover all crucial aspects of how to start a real estate business, we’d recommend checking out Mashvisor’s real estate blog. On our real estate website you will find detailed resources on everything, starting from evaluating the best real instatement strategies for beginners, through buying rental properties with a high return, all the way to managing an income property successfully.
Build the Necessary Network for a Real Estate Business
As you will soon realize, real estate is a people’s business. In many cases, how well you do as a real estate investor will depend on the people you know.
That’s why you should start building a real estate network for success right away. Your network should comprise of different real estate professionals such as other investors, real estate agents, brokers, wholesalers, flippers, mortgage brokers, private money lenders, hard money lenders, appraisers, home inspectors, insurers, property managers, and others.
If you are not sure where to start, it might be a good idea to join a real estate investment club. This will help you meet many people with similar real estate investing interests to you and start building relations with them right away.
Meanwhile, the most important member of your real estate network is your mentor. As someone who’s just starting in the real estate business, you will need some one-on-one guidance. Consequently, you should actively work on building a closer relationship with someone experienced from your network. You can openly ask him/her to become your real estate mentor. Most successful real estate investors are proud of their achievements and happy to help others reach a similar level.
Choose the Most Appropriate Real Estate Investment Strategy
Once you have sufficient knowledge of how to get started in real estate investing and have met some important people, it’s time to decide on your strategy. Once again, the sky is the limit.
If you are interested in making a good amount of money in the short run, you can consider wholesaling real estate and flipping houses.
If what you are after is long term profitability, then you can look into buy and hold and REITs.
The best passive real estate investment strategies for beginners include real estate crowdfunding.
If, on the other hand, you want all of these, investing in a rental property is the right answer for you. Buying an investment property to rent out is a great way to make money in the short term (rental income) and in the long term (real estate appreciation). Traditional and Airbnb rental properties can also be turned into a source of passive income by hiring professional property management services.
Use our free Airbnb calculator to estimate the potential Airbnb rental income of a specific property in the US.
Figure Out Financing
Depending on the strategy that you choose to start a real estate business, you will need a budget. This, of course, also depends on your savings and income.
If you decide to go for investing in rental properties, you will have to cover the following start-up costs:
- A minimum of 20% down payment
- Home inspection
- Closing fees
- Fixes and repairs
- Property tax
- Home insurance
- Furniture (if you decide to run Airbnb rentals)
Naturally, with an income property you will also have recurring expenses. While you should expect to cover those from the rental income and still be left with positive cash flow, you should set up a contingency plan in case things go wrong with your tenants or Airbnb guests.
Find the Best Real Estate Market for Your Business
Not all housing markets are created equal when it comes to the profitability opportunities that they offer to real estate investors. Some markets are better suited for a successful real estate business than others.
Important factors to consider when looking for one of the best places to invest in real estate include the economy, the labor market, the demographic growth, business figures, and tourist attractions. As a beginner real estate investor, you should not be limiting yourself to the local US housing market if it doesn’t provide the right conditions. You can easily get into out of state real estate investing if you hire a rental property manager.
However, finding the right location from the thousands of US cities and towns takes months and months of research and real estate analysis. To save your time, we offer you a list of the most profitable markets for both long term and short term rental properties in the US in 2020:
- 20 Most Profitable Locations for Traditional Rentals in 2020: Cash on Cash Return
- 20 Most Profitable Airbnb Locations in 2020: Cash on Cash Return
Once you select a location which matches your budget (median property price) and expected return on investment (cash on cash return), you can narrow down your real estate market analysis to the neighborhood level. One of the must-learn real estate tips is that different areas in the same city provide varying opportunities. So choosing the best neighborhood is as important as choosing the right city.
With Mashvisor’s heatmap – one of the best real estate investment tools in our arsenal – conducting neighborhood analysis in real estate is easy. You can quickly and easily find areas with affordable home values, high rental income, good cash on cash return, and optimal Airbnb occupancy rate.
Another important aspect of the real estate market analysis that you need to conduct is finding real estate comps. These are properties for sale as well as recently sold homes which closely resemble the house you plan to buy. Comparing their prices will help you identify the fair market value of your future income property.
Look for Investment Properties for Sale
The next step in the process of starting a real estate business is the investment property search. It’s best to include a mix of real estate listings such as MLS listings, foreclosures, short sales, bank-owned properties, and off market properties.
The most efficient way to search through all of these property types is to sign up for the Mashvisor real estate app. The listings on our platform include all these varieties. Moreover, you can narrow down your rental property search and focus it on the exact requirements that you have set as a first-time real estate investor. Just use the available filters on our real estate investment software platform.
Analyze Your Favorite Listings
After narrowing down your investment property search to a few rental properties for sale, you should analyze them in great detail. Your investment property analysis should be based on the performance of traditional or Airbnb rental listings, depending on your preferred rental strategy. You should include real estate data as well as traditional rental and Airbnb data to figure out what rental income, what occupancy rate, and what return on investment you can expect.
The most efficient way to do that is to use a rental property calculator like Mashvisor’s. Our rental property analysis tool will provide you with all the figures and numbers that you need in order to invest in positive cash flow properties with a high cash on cash return and cap rate.
Moreover, if you are neutral to becoming a landlord or an Airbnb host, we will help you choose the more profitable rental strategy in your market and for your property.
Buy the Property
The last step is to buy an investment property. That’s the culmination of your efforts towards starting a real estate business.
If you have some experience in buying a house, you can do this on your own. If not, you can hire a real estate agent to help you. There’s no need to worry about having to pay agent’s fees as those are covered by property sellers in the US housing market.
Regardless of which method you go for, it’s important to pay as low a price for your rental property as possible. This will decrease your one-time and recurring costs and make your rental business more profitable.
Related: How to Start a Real Estate Investing Business in 5 Easy Steps
Now you are almost fully prepared to start a real estate business in 2020. The only thing left is to sign up for Mashvisor to start searching for lucrative traditional and Airbnb rental properties across the US.