Getting Into Real Estate Investing: Key Preparations to Make
Updated: Oct 10
Ray Martin of Easton Connecticut, is one of the leading consultant brokers in the commercial real estate industry. He has licensure in eight states and has a Netwerk of investing brokers nationwide.Real estate remains to be a popular investment due to its potentially lucrative payoff. It’s also fairly simple to understand. As an investor, you buy a property, let its value appreciate, and cash out after a certain amount of time. When you compare real estate with stocks, you have a tangible asset you can see, visit, and improve; this is appealing to various kinds of investors. Additionally, real estate remains valuable as long as the property is well-maintained and located in an attractive area.
Set Your Real Estate Investment Goals
It’s important to set the goals you want to achieve from real estate investment. Defining what you want and what’s important to you right from the beginning can help make your decision-making process easier later on. Some of the things you should consider are: your budget, risk tolerance, returns, and appreciation value.
Prepare a Conservative Cost Estimate
As a new investor, expect some expenses and expect them to add up quickly. You may end up covering closing costs, as well as spending money on renovations and general fixes. These kinds of operating costs don’t mean you’ve made a bad investment. Rather, it just goes to show that you can underestimate your expenses.
Learn Common Real Estate Terms
Another thing you need to do in preparation for real estate investing is to familiarize yourself with industry language. You’ll likely come across terms and acronyms like amortization, leverage, 1031s, REI, REITs, NOI, and LTV. It’s important to learn about the language real estate professionals use and understand why they matter. It will help you feel more confident while conducting business and be in a better position to make educated choices.
Research on Different Locations
As a new investor, you need to pay attention to the location of the properties as it can affect your goals. Is the property in a growing city or town? Are there economic opportunities? What’s the neighborhood like? Are there schools and amenities nearby? Research the area so you can gauge the potential growth of your investment. It would also be beneficial to talk to realtors and property managers to get their insight into the local market.
Have an Investor’s Mindset
As you move from being a property owner to an investor, you need to also acquire an investor’s mindset. This means that when you’re looking into properties, your decisions must be based on the preferences of future tenants and not your own. Although it’s common to form an opinion based on your personal bias, you need to remember that you're not the one moving into the place.
Many people get into real estate investing because it’s a profitable market. However, building your real estate portfolio is not an easy task. Fortunately, doing the preparations mentioned above can help you ease your way into real estate investment. With some research and planning, you’ll have a rewarding investing journey.
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