10 Important Steps for Success in Real Estate Investing

The world of real estate investing can be very intimidating and challenging, especially for people who have either little or no experience, or are just getting started in real estate investing.

Each real estate practitioner or professional has their own level of experience and goals: some people who are at the beginning of their real estate investing career would like to know how to invest in real estate, and others who haven’t started practicing would like to know how to start investing in real estate.

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Although the content of this article might not be all-encompassing, it provides relevant information that can enlighten you on how to get into real estate investing and increase your chances of building your career and wealth, and minimizing losses or failure.

The 10 steps that will be discussed are:

1. Make a firm decision to start real estate investing

2. Get some education in real estate investing

3. Decide the real estate investing niches and schemes to focus on

4. Make your own real estate investing plan

5. Look for real estate properties to invest in

6. Choose the methods you would employ in financing your real estate deals

7. Choose how you would market your real estate investing business

8. Know when to utilize your exit schemes in real estate deals

9. Get adequate insurance for your real estate properties

10. Manage your real estate properties effectively

Now let’s discuss these 10 important steps for success in real estate investing:

1. Make a firm decision to start real estate investing

Apart from real estate, there are many other professions you can concentrate on; but if you are really interested in real estate investing, then you must make a firm decision and be prepared to face any obstacles or challenges that may come across your path in the future.

You have to make up your mind before getting into real estate investing; this is the first step you have to take in order to remain consistently motivated on your journey in real estate investing. One of the most popular reasons people give for investing in real estate is to acquire financial freedom.

Generally, each person who is interested in buying or selling real estate properties has their own personal reasons why they want to start or get into real estate investing. However, it is pertinent to note that any reason—including making money—might not always give you all the satisfaction you need; so you have to weigh every desire and intention and make a firm decision.

2. Get some education in real estate investing

Some people think that the education aspect of real estate investing is not important because they already know the basics; so they think that they know everything. It would be much easier for you to increase your chances of failure if you don’t have either a basic, substantial, or solid understanding of real estate investing principles.

Generally, a solid foundation is key to succeeding in real estate investing, and sustaining your success in the long run. Getting some education in real estate investing is one of the most important steps you should take because it can provide you with detailed information that can help you move forward in your real estate investing career.

So, how can you get some real estate investing education? You can get it by: going to a good school; reading information-rich books; getting and learning from a sound mentor; in addition, since the internet has a lot of valuable information, you can read articles on blogs or sites, and listen to real estate investing podcasts.

Even after consistently learning from many sources, there would always be room for you to keep learning, educating, and improving yourself.

3. Decide the real estate investing niches and schemes to focus on

You might have the impression that you need to know much about every real estate investing niche and scheme (strategy); however, the truth is that you don’t need to: you can concentrate on some niches and schemes before building on your experience and concentrating on more niches and schemes.

At the start of your real estate investing career, you might waste your time and wear yourself out if you try to be a jack of all trades or an expert in all niches and schemes/strategies. It is advisable that you conduct proper research and choose some niches and schemes (strategies) to get the best results and achieve your goals.

There are different real estate investing niches you can focus on: real estate investment trusts (REITs); commercial buildings; large apartment buildings (which usually need on-site management); small multi-family properties (duplexes, triplexes, and fourplexes or quads); single-family properties; small apartment complexes; mobile properties or homes; empty land and occupied land; tax liens; and notes (paper mortgages).

Also, there are different real estate investing schemes or strategies you can focus on: wholesale real estate; buy and hold; and fixers (flipping homes/real estate). Wholesale real estate is an easy investing strategy that usually involves low start-up costs. The “buy and hold” scheme of investing involves renting property and collecting cash periodically, or holding property and selling it for a higher price in the future. Flipping property (fixers) involves buying properties at reduced prices, renovating or improving their features, and selling them at higher prices.

4. Make your own real estate investing plan

The reason why you need a map or plan is that real estate investing is not always predictable; if you face some unforeseen circumstances in the future without a plan, the aftermath can be disastrous.

With an effective plan in place, you would be in a better position to know where you stand, and what to do at a particular point in time without getting lost. Your plan should include your goals and mission statement which have to be associated with the real estate investing schemes or strategies of your choice.

Although you should have goals, keep in mind that goals can be modified or changed a bit after a period of time, and this could affect your overall investing plan—but this is normal.

Therefore, you might be better off being flexible by having both short- and long-term goals so that at any point in time, there would always be a type of goal for you to look forward to.

Your plan should also include the real estate market or areas (for example: commercial areas, high-income areas, or low-income areas) you want to focus on, and expect to become an expert in.

It would be important to include the type(s) of financing deals you expect to use for real estate financing. Do you plan to use your own money to finance deals, or do you plan to loan money from private lenders, banks, equity partners, and other investors, or employ some other creative methods to finance deals?

Your plan should include every clearly defined step you would like to use in making profit; also, include how and where you would keep records of your profits and expenses so you can be in a better position to gauge your finances when the unexpected happens.

Things don’t always happen as expected; therefore, it is extremely important that you have backup plans and exit strategies in place to help you close good deals, and opt out of deals if they aren’t moving in the right direction.

Because you can’t succeed in real estate investing by yourself, be prepared to have a team of professional colleagues to whom you would assign tasks. It is very certain that you would need the services of a mentor, a contractor, a plumber, an attorney, an insurance agent, an accountant, a property manager, and maybe a realtor. 

You need to have a plan for employing the services of professionals who can help you achieve your goals; with every important piece of information included in your plan or roadmap, write down a timeframe in which you expect you achieve your goals.

5. Look for real estate properties to invest in

Before you can start investing in real estate or get involved in a deal, you have to look for a real estate property or some properties, use your schemes to invest at the lowest possible price(s), and do all you can to sell them at the highest possible price(s).

Your profit potential can be negatively impacted if you invest in/buy properties at prices that are too high, and sell them at prices that are not guaranteed to bring good profit.

Therefore, when looking for properties to invest in, look for the ones that would make it easy for you to execute your exit strategies, especially if you notice along the line that you won’t be able to make your desired profits.

Before looking for properties to invest in, have selection criterion in place, and if a property doesn’t make any sense in terms of appreciation, don’t invest in it. Your selection criteria for properties would help to keep you focused on properties that are associated with your niche and investing schemes or strategies.

Examples of a criteria list or selection criteria include: areas or neighborhoods in a town; size and condition of a property; the number of housing units; appreciation potential; cap rate; etc.

For the sake of illustrating selection criteria: let’s say you want to employ the “buy and hold” scheme on only new small apartment complexes, then you may decide to exclude old large apartment buildings and other types of properties from your selection criteria.

Your selection criteria should also include where you would look for information regarding properties: you could look at popular avenues such as newspapers, MLS (Multiple Listing Service), Craigslist, people and real estate agents (word of mouth), Loopnet.com, outbound marketing, LinkedIn Investor Groups, etc.

6. Choose the methods you would employ in financing your real estate deals

It would be difficult to succeed in real estate investing without a financing method in place. If you don’t have your own money, there are other options you can always explore to invest in real estate.

Generally, the types of financing methods that exist are: hard money, owner money, private money, all cash, portfolio lenders, 203k loans, FHA loans, home equity loans & lines of credit, commercial loans, conventional mortgages, partnerships, and other creative methods.

Regardless of the method you chose, only go for deals that make sense financially. To help you decide which deals make sense, you have to know or evaluate the income, cash flow, and return on investment for each deal.

7. Choose how you would market your real estate properties 

In real estate investing, the most important asset you can market is the combination of yourself and your brand or real estate investing business. To market yourself effectively, you need to be a true professional, exude a high level of integrity and some other major qualities.

Apart from marketing yourself, you need to network with other professionals on a consistent basis and build healthy relationships targeted at achieving success in real estate investing. Avenues for networking include local, national or international organizations, social media, and forums on blogs or websites.

You can also market your real estate investing business by direct mail which can be used to send ads to your target audience; however, it is crucial that you have a constant supply of leads to make direct mail as effective as it can be for your business.

By paying for ads and acquiring advertising space on Google and Facebook ads, it would be possible to reach potential renters, buyers, sellers, and professionals from other types of businesses, and keep them as repeat customers.

8. Know when to utilize your exit schemes during real estate deals

Real estate can be a very demanding profession. In order to manage deals involving properties, you need to know when to use the best scheme or strategy to exit deals or investments and achieve your goals which should be targeted at making good profit.

One of the most popular exit schemes is traditional selling: you sign an agreement with a real estate agent and close a deal by paying the real estate agent a commission after they succeed in selling a property you list with them.

It isn’t necessary to use a real estate agent to seal and close deals; if you know how to do it by yourself, then you could use the “for sale by owner” exit scheme and save the fee that would normally go into an agent’s pocket if you employ their services.

If you sell a property to a buyer but decide to continue carrying the mortgage instead of asking the buyer to apply for their own mortgage, then you can use “seller financing” as an exit scheme.

Under seller financing, the seller acts as a bank and puts out a type of loan to the buyer who would make a down payment and continue to make payment to cover the mortgage for the duration of the loan.

Another exit scheme is the lease & purchase option. You can use this option to reach an agreement with a tenant: ask them to make usual monthly payments for a leased or rented property, but let them have an option to buy the apartment at an agreed price and within a certain time period.

9. Get adequate insurance for your real estate properties

Life is unpredictable, and unfortunate things like water leakage, wildfires, and floods could happen and destroy or deteriorate real estate properties. Fortunately, we live in societies that have created platforms to provide insurance and protect people from bankruptcy and losses as a result of unforeseen circumstances. 

Before you close a deal on your rental property, ensure that you’ve ordered for insurance and gotten adequate insurance coverage. Good insurance can help you avoid so many situations you would likely never see coming. 

Get a knowledgeable insurance agent on your team, discuss your options with them, and ensure that they get you the right insurance—and enough of it. A knowledgeable insurance agent would help you secure the best insurance policy.

10. Manage your real estate properties effectively

No matter the amount of effort and time you use to achieve success in real estate investing, you have to manage your properties properly in order to preserve them; if you mismanage them, you could lose them within a short period of time.

When it comes to managing your real estate properties, should you manage it by yourself, or hire a property manager? The simple answer is this: “it depends on whether you have the skills and time to properly manage your properties”. 

Among people who practice real estate investing, some are skilled enough and have enough time to manage their own properties, while some others are skilled enough but lack enough time; yet, some others aren’t skilled enough, but have enough time; so generally, managing properties depends on each individual. 

If you are not competent enough or don’t have enough time to manage your own properties, hire a good and selfless property manager because they can save you a lot of time, keep you away from a lot of stress, and help you focus on your real estate investing business.