With the increasing prevalence of AI, I turned to ChatGPT to uncover the most common Internet searches related to real estate investing. According to its findings, the top three themes in real estate investing searches are “how to start real estate investing," "real estate investing strategies," and "best locations for real estate investing."
The popularity of the first topic, "How to start real estate investing," suggests a significant number of aspiring investors who are interested in entering the real estate market and seeking guidance on where to begin and how to navigate the complexities of this industry. I am frequently asked about building a real estate portfolio, identifying investment properties, financing options, and legal protection in our litigious society. Here are four key guidelines I recommend following when getting started in real estate:
1. Have a Clear End Goal in Mind
For those aspiring to start investing in real estate, it's crucial to have a clear end goal in mind. What outcomes do you expect from real estate investing?
Many people initially believe that real estate investing allows for passive income and minimal time investment, aiding their retirement plans. However, this perception often changes once they delve into property acquisition. The due diligence process in real estate can consume a significant amount of time and energy, almost resembling a second career. Therefore, it is vital to allocate the majority of research time to selecting the right professionals to work with. Having highly experienced experts on your team is paramount.
2. Focus on Building Relationships
While many individuals in the real estate field possess licenses and can assess market value, list properties, and complete contracts, real estate investment requires extensive experience. As the saying goes, "Good judgment comes from experience, and experience comes from bad judgment."
Although this approach may work on the grade-school playground, it poses significant risks when applied to real estate investing. Instead, seek out professionals who have long-term involvement and a track record of personal and professional success in real estate investment. Develop relationships with these individuals, establish checks and balances, and leverage their experience to increase your chances of success.
3. Start Slow
Take the time to thoroughly analyze the markets that interest you and start with a cautious approach. Begin by exploring single-family property acquisitions. Although it may be tempting to jump into larger investments like multifamily properties right away, remember that even the world's fastest runners started by crawling.
Familiarizing yourself with single-family investments and obtaining conventional financing through experienced lenders will provide you with valuable experience and minimize risk. Single-family properties are among the easiest assets to divest of if the need arises. Look for areas where you can maintain consistent rental occupancy throughout your ownership and have the potential for increasing rents.
4. Prioritizing Understanding the Market
Additionally, consider areas with a tendency for appreciation. Connect with professionals in these areas who work with numerous investors and have a reliable property management system in place. When conducting research, prioritize analyzing the market and evaluating the professionals in the area over scrutinizing specific properties.
By following these guidelines, you can set yourself up for success in the realm of real estate investing.
About the Author:
Aaron Chapman is a veteran in the finance industry with expertise in complex transactions since 1997. He is ranked in the top 1% of over 300,000 licensed loan originators and closes over 100 transactions per month. Learn more at aaronbchapman.com.
The views and opinions expressed in this blog post are provided for informational purposes only and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.
SecurityNational Mortgage Company, and its loan officers, unless individually licensed and specifically denoted in their credentials, are not qualified to, and are prohibited from representing themselves as accountants, attorneys, certified financial planners, estate planners, investment specialists, or tax experts, and will not advise you in those matters. Always seek the advice of a licensed professional. This article is for informational purposes only, contains the opinion of the author, not necessarily the opinion of SecurityNational Mortgage Company, and should not be construed as lending advice. Loans are subject to borrower qualifications, including income, property evaluation, sufficient equity in the home to meet LTV requirements and final credit approval. Approvals are subject to underwriting guidelines, interest rates, and program guidelines, and are subject to change without notice based on applicant’s eligibility and market conditions. Refinancing an existing loan may result in total finance charges being higher over life of loan. Reduction in payments may reflect longer loan term. Terms of the loan may be subject to payment of points and fees by the applicant. Aaron Chapman, NMLS#267844, SecurityNational Mortgage Company Inc., Co. NMLS# 3116, AZ Banker# 0904315, Equal Housing Lender. Any amounts, figures, payments, or loan terms stated are based on continually changing markets, rates, loan programs, and borrower-specific qualifications, and subject to change without notice. See loan officers featured for a personal consultation and accurate pricing.