10 real estate investing tips for beginners

1 – Market research

May sound obvious but this is the number one mistake I’ve seen from real estate investors. Many people buy properties because they look like a bargain to them. Yes, but what if it doesn’t rent out? The very first thing that I recommend my investors to do is to make sure they are considering properties with a high likelihood of being rented out.

2 – Conduct a property inspection before buying the property

Mistake number two. I’ve seen so many investors buying properties without inspections because “they looked OK” and suffered from that. First, chances are that the repairs may end up costing A LOT more than you imagined. In some cases, they can cost more than the actual property (especially if there is something wrong with the foundation). Second, you can actually get real numbers to put a proforma together and decide whether the deal makes sense.

Do not get caught off guard!

3 – Track your expenses from day one

Mistake number three. I just published an article on tracking your expenses. So many investors fail at keeping track of their expenses because “they pay for them with their checking accounts”. I do that myself, but it doesn’t mean that we should not track those expenses. The main reason to track expenses has to do with knowing your numbers. If you don’t know whether you’re making money on your property, how should you expect to scale your business?

4 – Know a lot of contractors

A fundamental part of a good REI business. Knowing multiple contractors means that your flips won’t ever stop, you’ll always have somebody to inspect a home you gotta close fast, and so on.

I typically ask for a few quotes on each renovation I do. This allows me to have the best of the best deals. It also happens that one specific contractor may charge you more on a specific location (because they are located far from that location). Always keep a bunch of contractors in your contact list!

5 – Grow free platforms to advertise your homes

This is an awesome idea because Real Estate companies charge a lot to rent out your homes. I like to grow my own platforms to advertise my homes and cut down on fees.

I personally like Facebook a lot. Create a page, and invite your friends to like it and invite their friends to like it too. Run a few contests and ads, if need be. My Facebook pages for my Real Estate properties have a total of 5000 likes. It has been a successful way to generate leads and get prospective tenants to visit and rent out my properties.

Facebook is yet another way to do it. You can use Craigslist (be aware that there are many Craigslist rental scams, so don’t take it personally if people don’t trust your ad right away) or even grow your own e-mail list. The latter has been very effective for a very good friend of mine, but I haven’t tapped into that yet.

6 – Create a limited liability company to hold your rental properties

This one you should discuss with a lawyer and this is by no means legal advice. For risk management reasons you should consider setting up a limited liability company to hold your real estate investments.

There are a gazillion reasons why you could be sued. If you protect your personal assets (creating an LLC to hold your rental properties). If you are sued, you’ll at most lose your investment, but your other assets stay out of reach.

7 – Get to know a lot of real estate agents

This is really how the best deals are done. If you know and become friends with many real estate agents, you should expect to be offered a lot of deals before they reach the public (if you show them you are a recurrent, serious buyer).

8 – Understand intelligent remodeling

I’ve written before on intelligent remodeling, i.e. ways that you have to maximize your remodeling value, but keep your costs low. I am fortunate I got to stay at marvelous hotels throughout the world, due to traveling a lot in work. This allowed me to see many renovations and get a lot of ideas from these places, which I use to this day.

9 – Get ideas from magazines

Not long ago, I was featured on Home and Beauty, and I decided to explore their page. Boy, I got so many ideas from that! If you understand that intelligent remodeling is the key to maximize value and minimize cost, you’ll immediately understand why this is so important.

10 – Create value, but don’t sell yourself short

The philosophy I use to run my Real Estate business is to create a lot of value. I want people to come to my homes and be astonished by the remodeling I do and the rents I ask for. I try to create as much value as I can (that is my philosophy in business, really). However, there is a limit where you start selling yourself short. Do not do that! Charge reasonably, slightly below-market rents for high-quality homes, but don’t decrease rent just to get a tenant!