Forget about the myths of becoming wealthy by real estate investing. Learn the ABCs of real estate investing right now.
Unless you have a pile of cash or a million dollars of credit to invest, start simple and grow from there. Some investors are lucky, while others have time to read books and take courses on real estate investing.
We’ll give you the basics right here and now.
KEY TAKEAWAYS
- How to set your investment goals.
- How to build a winning team.
- Learning about construction.
- What do real estate investors do (both active and passive ones)?
- Learn different investment niches.
- How to rent your houses and units.
- Understanding real estate and income taxes.
Accomplish an Investment Goal
Set a goal to accomplish with your first real estate investment. If you buy a fixer-upper house to rent or sell, your goal can be accomplished in one year. Then, you move on to your next goal.
You don’t need a personal fortune to begin. Think of what type of deal you can profit from. As the old saying goes, “Buy low, sell high”.
Search for diamonds in the rough. Seek undervalued properties (heavily in debt, depressed, run-down, or on the fringe of a rising location). Read our two blog posts explaining this:
How to Find a Growing Real Estate Market; and
How To Buy Real Estate “In The Path Of Progress”
Making a good profit from your fixed-up rental? Or, did you sell it for a nice profit? Go to the next step.
Build a Winning Investment Team
You can make more money in the long run by building a business team to support you. Meet the future members of your real estate investment team:
- An Attorney who knows real estate laws and taxes;
- An Accountant experienced with real estate investing;
- A Realtor who knows the market area you will invest in;
- A Home Inspector who will inspect properties before you make an offer;
- Contractors who will repair, renovate, and build your properties;
- A Property Management Company to do all the landlord tasks for you; and
- A Lender you can work with.
These 7 team members will help you to grow and make more profits.
Construction Experience
Working with your home inspector and the contractors you hire will teach you the home construction business. You will gain practical knowledge and experience with every project. You will learn everything about electricity, plumbing, roofing, foundations, wall structures, flooring, and energy systems.
Beyond the ABCs of Real Estate Investing
What you read above are the basic ABCs of real estate investing. These include:
- Accomplish a Goal;
- Build a Team; and
- Construction Experience.
But wait, there’s more to learn before becoming a successful real estate investor.
What do Real Estate Investors do?
Passive Real Estate Investors
There are so many ways to make money with passive real estate investments. You can invest passively by buying shares in real estate industry companies. Or, you can invest in real estate funds like REIT, crowdfunding, or real estate funds.
A Real Estate Investment Trust (REIT) as defined by Motley Fool is a legal “entity to pool investor money and collectively purchase securities like real estate bonds and stocks, or real property projects”. The pooled funds make different real estate-related investments.
Kiplinger recently published a useful article titled “The 12 Best REITs TO Buy for 2022”. They provide detailed descriptions of each one.
Rocket Mortgage lists several real estate passive incomes along with a good explanation of what passive real estate investing is. Examples include crowdfunding, real estate funds, REITs, and remote ownership which requires a property manager.
Active Real Estate Investors
While some prefer to give full control to experts to handle their passive investments, others want to exert control.
Active real estate investing requires:
- Researching the target market;
- Looking at properties;
- Hiring a pre-offer home inspector;
- Making an offer and negotiating with the seller;
- Preparing or understanding the purchase agreement;
- Lining up a lender (if you don’t have the cash); and
- Going through the escrow closing.
Know the Different Real Estate Investing Niches
Several ways to invest in real estate exist. These are known as “niches”. You may want to choose a niche to specialize in. The options are explained in the following list:
- How To Invest In Multi-Family Real Estate;
- How to Flip a House for Beginners;
- Why You Should Start Investing With Single-Family Rentals;
- How Novices Buy Small Multifamily Properties;
- Should I Flip or Rent Homes?; and
- What is the BRRRR method in real estate?
Have questions?
Now that You Own Investment Property
Once you own the property you either rent it out or fix it up for a re-sale. If you rent it, you may still need to make repairs and improvements so it attracts tenants. Likewise, if you want to sell it you may still have to do repairs and add improvements to attract buyers.
How to Rent Your House or Unit
Becoming an active landlord is not easy. You need to get the house or unit ready to rent. This includes making it safe and habitable. Sprucing up the rooms or units requires fresh paint (we recommend neutral colors), updating bathrooms and the kitchen fixtures, and Safety features include fire/smoke alarms, updated electrical and plumbing, and sturdy guard rails on stairs and balconies. Read the following articles about these:
- 9 Common Apartment Repairs Every Landlord Needs;
- How to Make Rental Property Improvements Under $500; and
- Checklist to Make Your New Home Safe.
Before you become a landlord you need to learn the basics. Read these helpful articles:
- How To Get Started As a Landlord;
- How To Achieve Low-Stress Landlording;
- Biggest Landlord Mistakes;
- Why Real Estate Rental Investors Fail?;
- How to Think like a Landlord; and
- Landlord Mistakes Limit Profits (What You Need To Know).
If becoming a landlord will take up too much of your time, consider hiring an experienced property management company. These articles will teach you the benefits of hiring a property manager:
- When You Need a Property Manager;
- Advantages of Using Property Management Company; and
- How to Hire a Property Manager in California
If you invest in San Diego County, we recommend hiring the WeLease Property Management Company. They can do everything for you. This will make you a happy passive rental investor when you earn good profits without doing the work.
Contact WeLease before you start to look for tenants in the greater San Diego area.
Understand Real Estate Investing Taxes
Before you spend all your rental income profits, you must consider tax obligations.
Tax laws are written by lawyers and politicians. So, naturally, they are hard to understand and follow. Yet, failing to pay your federal and state income taxes leads to heavy fines and civil penalties, and possibly criminal conduct.
That’s why two of your team members include an accountant and a lawyer who know all the real estate and income tax laws.
Active real estate investing offers many tax deductions to save you money. Read these articles to learn about these tax deductions:
- Important Tax Deductions for Rental Property Investors;
- Tax Savings Tips for Real Estate Investors;
- How 1031 Exchanges Work; and
- How San Diego Landlords Save Taxes
ABCs of Real Estate Investing – Conclusion
We covered a lot of important topics including and beyond the ABCs of real estate investing. The ABCs are:
- Accomplish a Goal;
- Build a Team; and
- Construction Experience.
We also explained:
- What real estate investors do – Both active and passive investors;
- How to rent your house or unit;
- Becoming landlord tips;
- Learning real estate investing niches – like single-family or multifamily rentals, BRRRR, or flipping homes; and
- Understand real estate investing taxes.
Thinking of Investing in San Diego County?
As we demonstrated here, our Realtors know all about real property investing. Whether you want to buy single-family or multifamily properties, fix & flip houses, or use the BRRRR method, our Realtors can help you.
Best in San Diego: We are the best brokerage in San Diego for four straight years (2018 – 2021) by the LocalBest.com site.
Big Block Realty is the 49th Best Independent Real Estate Brokerage in the U.S.
For real, the Wall Street Journal partnering with Real Trends selected us as #49 for 2021 out of 106,000 real estate brokerages in the U.S.
View our recent posts with screenshots and source links of all our awards:
- Best Real Estate Broker San Diego 2022; and
- Big Block Realty Named In Top 100 RE Brokers In The United States;
Contact us now to see how our Big Block Realtors can help you with your real estate investments in San Diego County and other parts of California.
Steven Rich, MBA – Guest Blogger
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Steven Rich, MBA has been involved in the real estate industry for over 30 years. As an investor, real estate agent, associate editor of a real estate magazine, a real estate marketing expert, a Wikipedia real estate article author, and as a writer.
