According to Mordor Intelligence, the U.S. residential real estate market is valued at $2.53 trillion in 2023 and is expected to reach 2.80 trillion by 2028. That’s a compound annual growth rate (CAGR) of 2.04% during the forecast period of 2023 to 2028. So now is as good of a time to invest in real estate as any.
Real estate investing comes with many benefits: regular rental income, property appreciation, tax benefits, and more.
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But for beginners, there are some barriers to entry that can make it hard to get started. So here are five tips to help you along your way to becoming a real estate investor:
Table of Contents
1. Start with a clear goal
Before you invest, it’s important to have a goal in mind. You need to clarify the why of your real estate investing before you get to the how.
For example, do you want to create a steady source of passive income? Or do you want to invest in a property to pass down to your family as an inheritance? Or maybe you simply want a safe place to stash your cash. Whatever it is, be clear about what your goal is.
2. Pick a real estate investing strategy
Once you have a goal in mind, it’s time to pick a real estate investing strategy. There are many to choose from. You can buy and hold, fix and flip, or rent out property. Within rentals, you also have the choice between renting to long- or short-term tenants.
For a hands-free approach that requires minimal involvement, consider investing in a real estate investment trust (REIT), which is traded like a stock on the stock market.
It’s also wise to diversify your investment strategy by choosing a combination of the above. That way, you don’t put all your eggs in one basket.
3. Hire a professional agent
A good real estate agent will help you find properties that fit your investment criteria. Finding deals is their specialty. They may also provide helpful advice about the local market. But most of all, they can serve as your feet on the ground, alerting you to good deals when they come up so you can snag them before others do.
4. Take advantage of tax breaks
One of the best things about real estate is all the tax breaks that come with it. For example, you can write off your maintenance and repairs, home insurance, property taxes, and even the property’s depreciation (over a period of 27.5 years).
In addition, property owners can defer paying capital gains tax indefinitely by performing what’s called a 1031 exchange, which involves using the proceeds from a property sale to buy another similar house.
5. Build a strong industry network
Lastly, be intentional about building a trusted network of industry professionals. Your network should include contractors, such as electricians, plumbers, roofers, painters, etc. They are especially important for fix-and-flip and rental properties. Just make sure to vet contractors before working with them to ensure you get quality work.
Other industry professionals you should connect with include agents, attorneys, lenders, and property managers. Why? Because they can help you scale your real estate investing business as needed.
For example, Green Residential, a Houston property management company, partners with many investors. For a fee, it takes on the day-to-day property management so that investors can focus on finding their next deal.
Final advice: Stick to the plan!
Ultimately, it’s important to remember that real estate investing takes time. It can be tempting to switch strategies or quit when you don’t see immediate results or rush into a deal in a hot market, but try not to. Hang tight and be thorough in all your investment decisions. Run the math before each deal to make sure it meets your goals.
When it comes to real estate investing, slow and steady wins the race.
