These tips will help you start your real estate investment correctly.

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For today’s topic, I want to start with one of my favorite quotes from Gary Keller: “Most people think buying is investing, but they’re wrong. Buying doesn’t make you an investor any more than buying groceries makes you a chef.” I love this quote because it makes you think long and hard about your strategies and goals when it comes to real estate investing. Here are six critical tips to remember if you want to get started on the right foot:

1. Ask yourself whether you’re cut out to be a landlord. The fact of the matter is that things break inside houses (one of the “joys” of homeownership). A broken commode or failed HVAC system never goes down at noon on a Monday; they go down during family dinner on Sunday or when you just got to your friend’s party to watch college football. These inconveniences are minor, but they still have to be handled.

Also, ask yourself whether you have the flexibility in your schedule to screen tenants. What will the process be for background checks, income verification, etc.? At the beginning of my investment career, I managed my own properties, but as time went on, I hired a property manager. Typically, they’ll take 10% of your gross income each month, but it is a service that takes all of the heavy lifting off your plate.

“The only way to truly understand value
is to look at a ton of real estate.”

2. Begin with the end in mind. Do you know what your investment goals are? Are you playing the long game (i.e., long-term wealth building), or is your strategy a short-term play? This will help to construct a plan for what types of properties to look for, what types of returns are acceptable to you, and how you approach each investment.

3. Know the market. You’ll likely need to look at a lot of real estate to truly understand values—both the value of the property and market rents. Oftentimes, the only way to truly understand value is to look at a ton of real estate. Get out there and study the market.

4. Establish a network of trusted partners and professionals. By this, I mean real estate professionals, property managers, mortgage lenders, bankers, inspectors, insurance brokers, etc. All of these people will have a huge influence on your investment.

5. Understand how to analyze the investment. Specifically, know how to calculate return on investment (ROI) and how that return aligns with your goals.

6. Build a rainy day fund from the very beginning. Make sure that you have reserves and continue to build your reserves. A good rule of thumb is to start funneling 10% of your annual gross rental income to your capital reserve fund each month. You don’t want to be stressed out when that HVAC system finally goes kaputski.

If you need help finding or analyzing investment properties or have any questions at all about this topic, don’t hesitate to reach out to me. I’d love to speak with you.