How to Get Started Investing in Real Estate

I started in real estate three years ago and now own 12 income producing properties. Here are the first steps I took to get started.

Real estate investing is one of the best wealth building tools out there (or so everyone says!). I had to see for myself. Three short years ago I decided to take the plunge and invested in my first property. Fast forward to today and I now own 12 income producing properties, I am under contract to buy one more and I am building a cabin also. It is an exciting time for me, and I can’t wait to see where I am at in three more years. But how did I get started? What did those initial steps look like that put me into motion to get where I’m at today?

Figure out what type of property you want to buy. For me this was easy, I wanted a vacation home! I wanted the flexibility to use it as I pleased, while travelers helped me pay the mortgage. I knew I wanted a cabin; I was in love with them at the time and enjoyed staying at other investors’ cabins during my various travels.

Cabins might not be your jam, and that’s ok. Some other things you may consider include multifamily, single-family homes, possibly even some sort of commercial building. This is all up to you. I would recommend narrowing in on this before moving on to the next step.

Determine how much cash you will need to put down and where the cash will come from. Determining these factors is important as they will dictate your budget for shopping when you calculate your loan to value ratio or LTV for short. This is the portion of equity that your lender will require you to have going into the property purchase. Most lenders recommend 20%, therefore meaning that on a purchase price of $500,000 you will need to have $100,000 to put down. Don’t forget to include closing costs (which your lender can easily quote you).

Next, it’s important to determine where the cash will come from. When I started investing, I used some retirement funds, make sure to check with your financial planner and CPA to determine if this move is right for you. You may have other means of cash which you can use, or you may even get money from family or friends (again check with your lender if this is possible).

Research markets and your comfort level for out of state investing. Where you purchase the property is entirely up to you! Some folks are not comfortable with out of state investing due to not easily being able to lay eyes on the property. I did quite a few out of state deals initially, and I still do out of state deals today – they are possible! If you aren’t comfortable with this, you can look in your own back yard or within a few hours of your neighborhood.

Ultimately, it is up to you to determine where the best investing location for you exists. If you are looking to do an Airbnb style property, I recommend researching vacation markets as they tend to have higher occupancy and better average daily rates or ADR for short.

Get a team in your chosen market. Building out your team is key, especially if you’ve chosen an out of state market. Your team will consist of your lender, real estate agent, handyman, contractors, and cleaner. The team may increase or decrease in size based on the type of property you’ve decided to invest in.

I’ve found the best way to build your team is through your own research which can easily be done via the internet. Facebook, Google, and Bigger Pockets are all great tools to get you started. Then reach out and share your intentions with folks. You may have to interview a few different people before you land on your core team, and that’s ok. If your team is strong enough, they should be able to assist you in refining the steps above and helping you stay on track to get your first investment property under your belt!