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Real Estate Investing Best Practices: How to Avoid Mistakes and Strategize Your Way to Wealth

If you’re interested in investing in real estate but aren’t sure how to get started, you’re not alone. Often, would-be real estate investors know that real estate investing is a reliable, relatively low-risk way to build wealth but aren’t sure how to initiate the process. 

When it comes to real estate investing, there are a lot of moving parts that go into making a successful investment. From understanding the market and your own personal goals to finding the right investment property and working with the right people, there are many things to keep in mind when getting started investing in this exciting industry.

A typical path new real estate investors take is starting small with an investment property, building capital, then investing in more significant, more passive real estate investment deals like syndications or real estate investment trusts down the road. 

Here at Goodegg, we know many successful investors who began their real estate investor journey in short-term or vacation rental properties. By starting with a vacation rental property or Airbnb in a desirable area, you can enjoy the income property with your friends and family while building your capital and gaining valuable real estate investment experience.

If freedom is one of your top priorities, you’ll, at some point, likely move from active investment projects to more passive investments. For example, vacation rental properties often lead to small multifamily properties and ultimately to completely passive commercial real estate syndications.

This is a great strategy, but there are a few things to do before getting started in real estate investing. Keep reading for a quick guide on how to take your first steps toward real estate investing success. 

In this blog post, we will explore some of the best practices for real estate investing. We’ll discuss things to do before starting your journey, how to avoid mistakes by starting with the end goal in mind, and how to strategize as a real estate investor so your deals play to your personal strengths. So whether you’re just starting out or you’ve been investing for years, these tips will help you stay on track and make smart decisions with your money.

Identify Your Strengths And How They Might Propel Your Real Estate Business

The first step is to identify your strengths. While this might sound cliche, understanding your strengths and weaknesses is crucial to your success. Everyone has areas where they don’t perform well, areas where they’re average, and areas where they truly excel. 

As we all know, when we’re able to focus our efforts on our strongest areas, we perform better and are ultimately more fulfilled. The same holds true in real estate investing. There are a lot of different aspects to real estate investing, and you don’t have to be good at all of them. By understanding your strengths, you can focus on the areas where you perform best and put together a team of people who excel in the other areas.

For instance, if you’re exceptional at seeing potential in undervalued properties and creating a renovation plan that brings a diamond in the rough asset to life but aren’t great at executing the plan, you need to focus your efforts where you’re the strongest. In this example, you should stick with finding rundown investment properties and creating an overall strategy for what needs to happen to bring them to their full potential. Since you’ve identified you’re not the best at executing a plan; you need to have a team comprised of a property manager, a trustworthy contractor, and others who can take your vision and make it happen on budget and on time. 

In another example, perhaps you thrive in evaluating numbers – tracking capital expenditures, calculating positive cash flow, making sure the improvements qualify for tax incentives, and noodling property management cost efficiencies; Then maybe you’re best suited for the underwriting and financial analyst side of your real estate investment strategy. In this case, you need a team of people including a real estate agent and others who can perform the improvements, conduct tenant screening, and monitor ongoing property management for you while you immerse yourself into the financial details.

Identifying your own strengths is essential, but it’s just as critical to identify the strengths of others as well. As you build a team, everyone will bring their own unique talents and expertise to the table. When everyone is operating from their own personal zone of genius, everyone is more productive and creative, creating a deal that’s ultimately more successful. 

Strategic Real Estate Investors Design A Plan Toward Building Wealth

Now that everyone’s strengths and passions have been identified, it’s time to design a plan to bring your real estate investment dreams to reality. 

Let’s face it, most of us want to design a life around our personal goals and desires. Real estate investing is a great way to get there.  But, it all starts with a plan. And that plan must start with the end goal in mind. What does your ideal life look like? How much money do you need to make it happen? When do you want to retire? What do you want to use your cash flow for?

Asking yourself these questions is essential to your success as a real estate investor. By starting with the end goal in mind, you can work backward and create a plan to get you there.

For example, let’s say your ideal life is to retire at 55 with $100,000 per year in passive income. To make that happen, you need an investment strategy that will generate enough rental income to cover your expenses and reach your cash flow goal.

To do that, you need to know how much money you’ll need to generate each month and what type of property (within your risk tolerance) will generate that income. Once you have a clear understanding of those numbers, you can start looking for properties that fit your criteria.

This is just one example of how starting with the end goal in mind can help you make better real estate investment decisions. By understanding what you want and putting a plan together, you increase your chances of achieving success.

When designing a viable plan, you must first do your due diligence. A real estate investment plan is not to be taken lightly. You, as the investor, must research what options are available to you, research the real estate market, determine what type of investment best fits your lifestyle and personal investment goals

Here’s a pro tip, get a pulse on what other real estate investors are doing. By following other real successful investors, you’ll quickly understand what’s working and what’s not. Also, be sure to stay up to speed on the current real estate investment market. 

While your plan may involve some trial and error down the road, do your part to establish a viable plan early on before you even need one.  That way, when an opportunity does come knocking, you’ll have the confidence to take action and get in the deal before it’s filled by other investors.

Successful real estate investors don’t get there by accident; they get there by design. So, if you want to achieve success in your real estate investing career, it’s time to start designing a plan that will get you there.

Take Action Toward Becoming The Real Estate Investor You Want To Be

Once you’ve put in the work to create a vision for your life and real estate investment journey, it’s time to actually DO something.

While this step seems obvious, it can also be the most difficult one to take. It’s not uncommon to get so wrapped up in the research and the due diligence of real estate investing that you suddenly find yourself stuck. You’re doing all the right things to gain education around how to make a profitable real estate investment but not actually taking any action steps. 

A smart way to combat this counterproductive behavior is to set yourself up on a timeline. Starting with research, map out each phase that needs to be completed. Once you have all the stages mapped out, include specific action steps that need to take place. Then, most importantly, add dates to your action steps. When deciding how much time to allow for each task, a good rule of thumb is to create a time frame that’s realistic and doable but also challenges you. You don’t want to make your action plan so comfortable that it doesn’t get accomplished within a reasonable amount of time. 

Remember, real estate investing is a business. As with any business, there are things you must do to get started and continue moving forward. Here are some key action items to help you get started: 

  • Get organized and create a system that works for you
  • Educate yourself on the ins and outs of real estate investing
  • Find a real estate mentor or coach
  • Join a local or online real estate investing community
  • Attend local and national real estate investing events
  • Invest in your personal development

Action, after all, is intended to get you from point A to point B, point A being where you are now, and point B is the lifestyle you’re dreaming of. The quicker you take action, the sooner you start progressing toward your real estate investing goals. 

The Two Main Property Types In the Real Estate Industry

In general, there are two main kinds of property: single-family dwellings/condominiums and commercial real estate, which includes both residential and non-residential properties.

Many investors think commercial real estate is a step up from owning rental properties. Commercial developers are viewed as a higher status form of real estate investment by some investors because they see it as a move-up into another industry. There is some truth to that, but there’s also a cost to be paid.

The cost of acquiring a single-family home is extremely low—in a class by itself from commercial property. Furthermore, the process to acquire and manage a small rental property is pretty familiar to most people, making it a seemingly easy way to get started earning rental income and getting your feet wet as a real estate investor. I say this with a reminder, however, that if your goals don’t entail real estate agents, property tours, hands-on property management, and the time commitment required to build your own rental property investment strategy, don’t get distracted with residential real estate just because it seems like a simple way to get started.

The commercial real estate asset class as a whole may seem more complicated to new real estate investors because the purchasing/investing process isn’t as clear. Other than certain HUD loans for apartment buildings, most mortgage companies do not provide 30-year fixed-rate mortgages for commercial properties. On top of that, most individual investors don’t have the credit, cash flow, or net worth to viably sign up as the guarantor for the financing of an entire commercial property themselves. So, it’s often that you need the right connections to a real estate investment group, some real estate professionals, or creative business partners to get a commercial real estate investment strategy off the ground. In short, commercial real estate IS more complicated – but it doesn’t have to be.

Here at Goodegg, we’ve made it our purpose to share our experience(s) in creating reliable income through real estate, our mistakes, how we got here, and what we look at before, during, and after making each investment move. We’re focused on creating greater accessibility to commercial real estate through syndications so that no matter if you’re about to buy your first property or you’re well versed in real estate investing strategies, you can rest assured that the opportunities you see inside the Goodegg Investment Club are thoroughly vetted.

We know your biggest fear is losing money, and while risk is always present, as experienced investors, we’ve seen what a good investment looks like in contrast to a sketchy one. Our real estate investment strategy has weathered natural disasters, recessions, stock market crashes, and more. So, you’re invited to establish your goals for your financial situation and lifestyle as outlined here and then join the club so you can have access to the many resources and educational materials we provide. There’s no requirement to invest and you get to explore the syndication investment strategy – our favorite hands-off way to generate passive cash flow and build wealth long term.

Propel Your Real Estate Investment Forward

Real estate investing can feel overwhelming, even intimidating, especially if you’re new to the process. However, it’s important to remember that progress doesn’t have to equal perfection.  As long as you’re moving in the right direction, you’re on the right track.

To make forward progress as a successful real estate investor, you have to trust yourself. You have to trust your strengths and your instincts. As time goes on, you’ll start feeling more comfortable in your new role as a real estate investor running a successful real estate investing business, but until then, it’s up to you to continue to propel yourself forward.  

There will always be challenges and roadblocks along the way, but if you stick to the real estate investing strategies you’ve outlined and trust in your own abilities, you’ll find a way to overcome those barriers. The goal is to achieve your vision for the life you want. With dedication and perseverance, anything is possible. 

Remember, your first few real estate investments will likely be a work in progress. Maybe you start out in a live-in flip or with single-family rentals and then move toward investing in apartment complexes as you hone in on the tax breaks you can enjoy from commercial real estate investment opportunities. You’ll quickly figure out what types of deals, which teams, and which investment strategies are aligned with your goals and the lifestyle you’re aiming for. Then, as your expertise grows, you’ll know how to adjust your real estate strategy and your overall vision accordingly. 

By creating a vision for your ideal lifestyle and real estate investment experience, starting with small, manageable real estate investment strategies, and taking action toward your real estate investment dreams, you can develop a portfolio of real estate assets that you can enjoy, while living a meaningful, intentional life as you build your wealth.

Now that we’ve discussed some best practices for real estate investors, it’s time to get out there and start making your dreams a reality!

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