They don’t teach real estate investing in high school or college. You have to go out and learn it on your own.
Toward that end, we offer hundreds of free articles, a weekly podcast, and monthly live webinars. But we decided to bring in some outside real estate investors to add even more perspectives and diversity this time around.
Without further ado, enjoy these ten tips for succeeding as a real estate investor from the mouths of pro investors themselves.
1. Focus on People Skills
“People skills are more important than you think. One investor I worked with took an online class about wholesaling. They had all these formulas they had to adhere to. What the investors failed to realize is that formulas don’t work when dealing with people. People have real emotions and real feelings — they aren’t spreadsheets!
“You need to dedicate time to role-playing your scripts and objection handlers. Practice your negotiation techniques. Remember that success takes practice, it doesn’t just happen.
“There are no ‘opposing teams’ in real estate. Both the buyer’s agent and listing agent have the same goal in mind: get the deal to the closing table. Work together!
“Finally, take care of yourself. Burnout is real in real estate. Set healthy boundaries. Make time for yourself and your family… even if that means putting it down as an appointment on your calendar.”
Christina Smith, landlord and business development manager for Oak Trust Properties
Tip from Brian: The key to negotiating real estate deals is discovering what the other party wants most. And it’s not just price: price is only one factor among many.
2. The Younger You Start, The Better
“If you purchase an investment property at an earlier age, then it’ll have more time for compounding interest to take effect, and it’ll have more years before taxes start eating away at the profit.
“You can also take advantage of tax benefits that allow investors to write off their capital gains from stocks and bonds. This is especially helpful if you plan on selling some of your property within five years or less because you may be able to avoid paying taxes on those profits.
“Younger people are starting to understand their financial situation better, and they are taking steps to improve on it. Investing in real estate at a young age is a way for younger people to take control of their finances, helping them build wealth as well as giving them peace of mind for the future. As an investor, you will be dealing with real estate cash flow and handling money every month once you begin investing. This will give you important experience in managing expenses, saving money, and exercising strong financial acuity. The real estate market is an attractive option for younger people because it allows them to build wealth and provide housing for the future.
“In addition, investing in real estate diversifies your portfolio, offers stability in times of economic turmoil and helps meet your long-term goals. Many people believe investing in real estate is just for the wealthy, but this couldn’t be further from the truth.”
Eric Chebil, founder and CEO of real estate startup Cher
3. Get a Real Estate Investing Mentor or Coach
“Real estate investing is the most complex and perilous of all investments. It will take a lot of effort to increase the likelihood of success, particularly for new investors. We were taught the fundamentals of investing in school, but experience has shown me that the best teacher is still experience.
“The most noteworthy advice I can give is to optimize the use of digital technologies, not be scared to take risks, not rush, and, most importantly, to seek out a mentor. Digital technologies have a lot to offer nowadays, and they may provide a wealth of advantages, particularly in real estate investing. Real estate investing tools can be handy for market research and property hunting.
“Real estate investing is always risky, so don’t be afraid to jump in. Always be knowledgeable, don’t rush, and be prepared. Finding a mentor is quite useful, and I’ve learned that there is always more to learn and experience in real estate investing, so finding one may be incredibly valuable.”
Dan Belcher, real estate broker and founder & CEO at Mortgage-Relief.com and a Real Estate Broker
Tip from Brian: Take our free video course “Ditch Your Day Job with Rental Income” as a primer.
4. Invest Near Stable Institutions
“Own real estate in direct proximity to a major university, university medical center or major employer.
“For me, I chose proximity to The University of Virginia Medical Center because of the many Medical Residents that come for medical residency at UVA. Medical Residencies are all in specialties ranging from general medicine to neurosurgery. Focusing on medical residents is good because (a) they are never in the unit because they are so busy, (b) they are not undergraduates and therefore are more seasoned adults and understand leases, paying power bills and are generally responsible individuals, and (c) because they get paid a fixed amount (approximately $55,000/ year regardless of specialty). So, they are price-agnostic as long as your unit is close and clean.
“Focus on one area for your real estate investments. I previously had both one-bedroom units a half-mile from the University of Virginia Medical Center and also two-bedroom units 5 miles away from the Medical Center. The variation of tenants between the one-bedrooms and two-bedrooms was immense and, ultimately, proved overly difficult. Medical Residents (more seasoned adults) rented the one-bedrooms close to the Medical Center and small families rented the two-bedrooms. The needs and wants of these two groups are disparate and time-consuming. Stick with one group that you know well (like I have done with medical residents).
“I get the Medical Residents to send me their Residency Acceptance Letter because if UVA (or another medical center) is willing to enroll and train them as a future doctor, then that suits me fine as a first-level security check. Of course, you can always ask for a copy of the prospective tenant’s bank account statement, driver’s license, parental information (verify that by calling parents) and, of course, Social Security Number as part of their rental application and tenant screening reports. All this information will be helpful if the tenant neglects to pay or damages the unit and you seek court intervention.
“Get co-signers on the lease if possible as that will make your life easier if a tenant fails to pay rent or damages the property.
“Use online rent collection where direct deposits in your bank account for your real estate LLC. Online rent transfer is much easier on both the tenant and you versus receiving physical checks to a PO box.”
Sean Miller, CEO at Miller Asset Solutions
5. Understand All Your Expenses
“One crucial tip that helped me succeed in real estate investing is understanding the costs upfront. If you think you’ll have to pay only for the cost of the property and realtor commissions, you couldn’t be more wrong. You also have to pay for the repairs, such as cracked foundations, electrical problems and pest infestations.
“You also have to budget for closing costs, insurance, maintenance, and other utility costs. If you accurately forecast all the costs, you’ll be better prepared to succeed in your investment.
“Make sure you also understand the market rent and pricing. Know how much the typical house in a community is worth, along with how much rent you could charge for a given investment property. Try to find out what home buyers or renters are looking for.
“For instance, don’t rip out a good yard to install a swimming pool if there’s no demand for it. It will only end up with you losing money in the long run. If you plan to make adjustments, ensure they’ll fetch you a good ROI.”
Erick Nilsson, Chief Executive Officer at Rentola
Tip from Brian: Use our free rental property calculator to forecast cash flow for any property.
6. Network Like Your Livelihood Depends on It
“You will find thousands of Real Estate Investing groups today, situated all across the country. You can join one or two of them. When choosing the right group for you, consider the one that has the same topics and types of people in which you are interested in. You should try to find the groups in which you can learn more about the areas that interest you the most.”
Robert J. Fischer, real estate broker and owner of The Robert J. Fischer Team
“Don’t only use the obvious sources for finding properties, keep your ear to the ground and create a network of people who may hear of opportunities before they are public.
“In particular, create a solid network of good contractors in each trade. Pay on time and earn their trust and respect. This is critical for your success of on-time and on-budget projects.
“And always encourage referrals.”
Anne Marie Cummings, Author
7. Budget Extra Time & Money for Renovations
“When you invest in real estate, your spending almost always exceeds your anticipation. In time of rehabbing a house, one issue can lead to another. Similarly, fulfilling the timeline is also quite difficult.
“This is why an investor should set aside at least 50% of the total budget as a reserve. The same goes for the timeline as well. If you are planning to do something in two months, accept the fact that it will take around three months to be finished.” — Robert J Fischer
“An emergency fund can turn out to be a life-saver for real estate investors. Especially, the landlords must keep some money aside to deal with the unforeseen expenses. Unless you have the fund, even the smallest problems can lead to great troubles.
Ron Wysocarski, real estate broker and CEO of Wyse Home Team Realty
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8. Hire a Real Estate Expert Accountant
“When your portfolio and responsibilities grow, you should definitely consider the option of hiring an accountant. An accounting professional has an in-depth understanding of tax laws, and so they can help to save a lot of money.
9. Don’t Drain Your Retirement Accounts
“Lose money in other areas first before dipping into your savings or retirement funds — this will keep you disciplined and allow you to remain focused on generating cash flow rather than simply breaking even with each deal.
“Real estate investing is a complex endeavor that involves many risks and rewards. The best thing to do when you’re just starting out: Lose money in other areas before jumping into this field! If you think it’ll be too risky, try making small investments at first. When the time comes for your big-time investment, you can be surer of yourself and better prepared to manage any financial setbacks or gains. Take on risk gradually rather than going all-in from day one. Losing money somewhere else will help mitigate the chances of doing so with real estate!
“Having some prior losses under your belt also boosts your confidence to walk away from red-flag deals. Sometimes deals fall through because they’re not meant to be; doing this means freeing up time and resources for better opportunities that may come along.”
Chris Brown, Realtor and the founder & CEO of Tudor House Consulting
10. Develop a Real Estate Investing Niche
“Develop a niche; mine is investing in heritage properties. Have a business plan to visualize the big picture and what you are trying to accomplish.
“Once you choose your niche, educate yourself on the market regularly.”
Anne Marie Cummings
“I like to invest in emerging areas. An emerging neighborhood is one of the safest and most profitable areas to invest in. You need to do some research in order to find areas that have excellent growth potential.
“Also, look out for places in which you can get some attractive tax incentives. Investing in such areas, you can expect a higher ROI over a long term period.”
Whatever real estate investing strategy you choose, commit to learning as much as humanly possible about it. Dive deep into one strategy, and ignore all the others until you can consistently earn strong returns with your chosen strategy.
Because unlike stock investing, real estate investing is not passive. It requires labor, knowledge, and skill to do right.
But it can also deliver outsized returns with less risk than paper assets. Learn well, build a real estate portfolio, and reach financial independence!♦
What are your best tips for new real estate investors?