If you’re like most people, the idea of receiving monthly checks without having to take on an extra job sounds amazing.
That’s why so many people are learning how to make money in real estate.
Unfortunately, this often seems a lot simpler than it really is and beginner mistakes are costly mistakes in the world of real estate investing.
How to Make Money in Real Estate: 6 Simple Steps
The good news is that it only takes six simple steps to learn how to make money in real estate without letting unnecessary mistakes get in the way.
1. Develop the Right Mindset
Most beginners think that learning how to make money in real estate involves step-by-step directions about finding the right properties and knowing how to price rent.
Those things are certainly important, but they won’t do you any good until you learn to develop the right mindset for real estate investing.
Here’s what the right mindset entails for making money in real estate:
- Patience – You won’t make money overnight by investing in real estate. It will probably happen a lot quicker than you think, but this isn’t a get-rich-quick-scheme.
- Stay Focused – There is no shortage of distractions out there. While you’re waiting for your real estate investment to prosper, it’s easy to consider taking your money and putting it into something else – something that promises a quick return. Stay disciplined and your efforts will eventually pay off.
- Leave Emotions Out of It – Nothing good will come from allowing your emotions to play a role in your business decisions. This is especially true when it comes to making money in real estate. Enjoy the process, but don’t buy or sell when you’re feeling emotional.
- Educate Yourself – We’re going to talk about this next, but, suffice it to say, you can’t afford to let yourself become lazy when investing in real estate. You must always educate yourself about this industry.
- Take Action – When you’re starting out, you’ll either be chomping at the bit to make your first investment or you’ll be extremely nervous about the proposition, albeit excited about the potential result. If you’re part of the latter, you’re not alone, but you won’t enjoy any returns until you finally take action.
- Ignore Bad Advice – It will take you some time to recognize what bad advice looks like, but learning to do so is an absolutely invaluable addition to your mindset. For the most part, if it comes from an unqualified source or falls into the aforementioned get-rich-quick bucket, ignore it.
- Ignore Detractors, too – Just because a detractor is unqualified doesn’t mean they don’t have the best of intentions. Still, whether it’s a friend or a family member, you have to ignore anyone who tries dissuading you from making money in real estate or you never will.
Once you have the right mindset in place, learning how to make money in real estate becomes much easier.
2. Invest in Education
Learning how to make money in real estate is really about learning how to enjoy consistent returns for the rest of your life. No matter what age you are, it’s about setting yourself up for financial security from now until long-past you retire.
It should come as no surprise that 1,200 of the world’s wealthiest people have one thing in common: they read. And they read with one very important purpose in mind: to educate themselves.
Again, at some point, you need to take action. You can waste a lot of time amassing a library of books and letting them collect dust as you work your way through them all (maybe even adding more as the years go by), but this doesn’t mean there’s no place for self-education before you begin investing.
3. Take Your Finances into Account
Obviously, you can’t invest any sum of money you don’t actually have.
However, looking at your own finances before you make an investment goes far beyond deciding how much you can afford to spend.
Everyone has their own parameters for what their dream life looks like. It’s vital that you get very precise with these parameters before you begin looking for properties to buy.
Otherwise, you may spend more than you need to or, worse, you may invest much less and not realize until years later that you aren’t seeing the kinds of returns your dream life requires.
Until you have a financial target to hit, you don’t have a solid plan and it should go without saying that lacking a plan is never a good idea when it comes to investing.
4. Look at Homes as Investments
You already know emotional investing is a bad idea, but this mistake isn’t just about buying when the market is trending up and selling the moment you think there may be bad news on the horizon.
A common beginner’s mistake among real estate investors is letting emotion cloud their judgment when it comes time to purchase a property.
They buy a house based on what they would want to live in. So someone in their late 20s or 30s look for a home they could raise their kids in. A younger investor looks for one that would be a great party-pad.
As a real estate investor, you need to view every potential property as an investment. You don’t buy a stock because you like a product the company makes. You buy it because you believe the market values that product and will continue doing so for the foreseeable future.
The same perspective applies to real estate.
Before buying a property, ask yourself questions like:
- Will it produce the returns I require?
- Is it in an area that will attract the ideal tenants?
- Does it appeal to the types of tenants that will support long-term property prices?
Don’t let your opinion of a home get in the way of cold hard facts, which are all that matter when it comes to making an investment.
5. Understand the Total Costs Involved with Owning a Property
If you already own your own home, this step is a lot easier. After all, you have experience with many of the costs that come after you’ve purchased your property.
For those of you who have never bought a home before, it may come as a surprise just how many other fees there are that you need to cover.
The hidden costs of buying a home can include things like:
- Conveyancing and Legal Fees
- Council and Utility Rates
- Establishment Fee
- Loan Application
- Mortgage Insurance
- Mortgage Registration and Transfer Fees
- Pest and Building Inspections
- Stamp Duty
Now, obviously, you’ll be getting help with these bills from your tenants, but it’s still vital that you think about these before purchasing a property as they will help you decide if it’s a good investment or not.
As the owner, you will have other costs to consider, as well. There is maintenance and you may even experience extended periods of vacancy when you won’t have any rent coming in.
Despite these costs, making money in real estate is still one of the best options for long-term financial security but only if you understand this overhead as a beginner.
6. Don’t Take Chances with Your Financing
Most beginners assume that learning how to make money in real estate comes down to picking the best property.
While that’s definitely an important step, just as important is how you’ll finance that purchase. Far too many beginners let their excitement cloud their vision here (there’s that emotion again).
They’ve saved up.
They’ve done their research.
They’ve found an amazing property.
So now there’s just the “minor” detail of receiving financing, right?
While self-education is still important unless you plan on spending years devoted to it before buying a property, speak with a qualified mortgage broker for help with this step.
Attempting it on your own could cost you thousands in the long-run. This kind of mistake might also turn you off from making money in real estate altogether as you won’t see the profits you thought you were promised.
Financing a property requires considering a number of different factors, something an experienced broker will have absolutely no problem doing and doing quickly, so you can finally make that purchase.
Learn How to Make Money in Real Estate from Actual Experts
Learning how to make money in real estate could take a year. It could take several. It could also take a couple very costly mistakes – maybe more – before you understand what you’re doing wrong.
This is why our A-Team Property Management mentor program has become so popular. Even if you’re an absolute beginner who has no understanding of what it takes to make money in real estate, we’ll take you through the entire process, step-by-step.
Best of all, we begin by finding out what it is you want from life, so we can make sure your investments will provide it.
Contact us today and begin benefiting from our proven expertise in this field.