How to Become a Real Estate Investor

Have you ever thought of becoming a real estate investor?

When opportunity knocks, do you answer the call? Maybe you’ve recently inherited a property, or you have money in the bank that isn’t growing. If you have the potential to become an investor, now can be an excellent time for you to jump into the action. With the right tools, guidance, connections, and know-how, you can maximize your chances for success.

Becoming a real estate investor can set you up for a lifetime of income that doesn’t flatline like fixed stipends. As home values and market rental prices grow, so will your passive income. The longer you invest, the better you get at it too. 

But does becoming a successful real estate investor happen by chance? Absolutely not. 

It helps to approach real estate investments with awareness and respect. By working with a full-service brokerage and property management company like Marketplace Homes, you can consult with experts who can help you find suitable properties, offer you unique advantages, and so much more.

If you’re ready to take the first step and answer opportunity’s call, it’s time to find out how to become a real estate investor.

Benefits of Becoming a Real Estate Investor

Taking the first step toward a new venture can bring up various feelings, such as excitement, expectation, or even anxiety. But when you play your cards right and navigate the market with knowledgeable partners, you can reap some excellent benefits, which include:

  • Long-term passive income: Your rental income will be taxed as passive income instead of earned income. Depreciation and amortization also ensure that your long-term passive income is taxed at a lower rate.
  • Investments keep up with the economy: Rental prices rise with market demand and inflation, unlike fixed social security checks or retirement stipends. Investments provide the extra income you need to live comfortably as you age, even as the cost of basics rises.
  • Time freedom: If you trust your portfolio to a property management company, you don’t have to worry about day-to-day tasks like rent collection, paperwork, and maintenance calls.

Step 1: Set Your Financial Goals

Before you become a real estate investor, you must understand why you’re doing it and what you want to achieve. For instance, you may want to acquire a few properties to provide a moderate flow of passive income for your golden years.

Or, you may want to go big. We’re talking about acquiring an extensive portfolio of properties in diverse markets. State lines are no barrier to you, nor do you have issues picking up commercial properties along the way. If you have the capital to invest in an ambitious portfolio, rest assured that Marketplace Homes has the resources to keep up with your needs too.

Now, you must figure out how much you want to earn. While there is no clear-cut way to fully predict your passive income due to market fluctuations, you can get a general idea of what you can make by speaking with experts. 

Working with a full-service brokerage will teach you valuable information like the 1% rule, which is one of the many ways of evaluating a potential property investment. This rule affirms that the monthly rent should equal or exceed 1% of the total price of an investment property. You can learn more about the 1% rule and other ways Marketplace Homes calculates potential earnings by speaking to one of our pros today.  

Step 2: Get Money

Before you can become an investor, you need properties. Before you can buy properties, you need money. How do you become a real estate investor without a large nest egg? Thankfully, there are quite a few ways to start without being a millionaire. 

  • Bank Loans: Conventional lenders have different loan terms. Some may require a down payment, examining your credit score, and other financial details to determine your interest rate and the amount you qualify for.
  • Hard Money Loans: This type of loan lends the borrower funds that are secured by real property. If you plan on flipping homes, this method of short-term funding can give you a large lump sum for renovations. Examples of hard money loans include rental property loans, fix and flip loans, refinance loans, and construction loans.
  • Private Money Loans: If you have some affluent family members or friends, you can be fortunate enough to borrow money privately. You can organize your own terms of repayment, interest rates, and investment partnership kickbacks.
  • Home Equity Loans: A home equity line of credit (HELOC) or cash-out refinancing allows you to borrow up to 80% of your home’s value to invest in a rental property. It’s an excellent way for any homeowner with equity to become an investor!

Step 3: Strategize Your Acquisitions and Dispositions

Investment income growth isn’t a linear path, but if you stay in tune with the market’s pulse and listen to real estate experts, you can get excellent insights on when and where to buy and when to release a property for maximum benefits.

For instance, you don’t just buy any property and expect to profit. You need to examine the market you want to invest in and understand how the tide is turning. An experienced real estate professional can teach you about rising markets, diversifying your portfolio, identifying good locations, and much more. 

Releasing properties when the area is in decline is also important. What may have made you money in the first five years can become a risk if the area changes. In this situation, it’s best to release this property and cash out. Your real estate partners can advise you on various disposition methods, including 1031 exchanges, cash-out refinances, or simply selling and walking away.

Step 4: Manage Your Properties

To fully experience the benefits of real estate investments, you must play the long game. Managing rental properties effectively will give you the highest possible profits with the lowest potential risk. When you hire a property manager, you can save time and maximize your cash flow. Here’s how a property manager (PM) can help you.

  • Tenant screening. A PM conducts background checks, credit checks, drafts leases, accepts and examines rental applications, handles rental insurance, and so much more. This reduces risk on your end because they are trained to do all these steps by the book.
  • Rent collection. You don’t lift a finger here. PMs ensure that you get a monthly cash flow while you continue on with your life.
  • Responding to maintenance calls. The PM’s full-time job is to stay on top of tenant requests and communications. You don’t need to worry about late-night calls or hunting down contractors. This maximizes tenant satisfaction and yours.

Become a Real Estate Investor with Marketplace Homes

Do you want in? Real estate investment is an excellent way to generate a long-term passive income that benefits you for years. If you’re ready to establish a legacy and make your money work for you through investments, contact Marketplace Homes today.