Investing in real estate takes hard work and smarts. The easiest way is to get started is to buy a home, live in it, and build equity as you slowly pay off your mortgage. You can also buy a home “as is” or in the condition it’s in with no repairs or improvements. You can then flip the home by repairing or renovating it and then putting it back on the market for a higher price. You can also buy a condo and rent it out.
While the risks may be higher and the return on investment slower than, say, stocks, putting your money in the Chicago housing market can be a very profitable and help you build real wealth for the future while growing your financial portfolio.
If you’re a novice in the real estate business, here are 7 tips that will help you get started on the right foot.
- Do your homework
You don’t have to be an expert investor straightaway to begin your real estate investment journey, but you do have to learn the ropes. Find out what type of real estate property works for you based on your interest, skill set, and level of commitment. Start with the basics—learn the difference between among property types such as commercial, industrial, residential, etc. Study the niche you’re interested in and learn as much as you can about the topic.
- Network with local investors
No man is an island – and that’s especially true in real estate. Seek out fellow investors and learn from them. Reach out to seasoned Chicago real estate investors in the area you’re interested in. Get to know where they hang out, chat them up, invite them out for drinks, and strive to have a good, solid working relationship with them. Local investors are a great source of information for what works in your community, and many of them are willing to help newbies “get their sea legs,” so to speak.
- Learn the language
Being a new real estate investor is like being a first-time visitor to a foreign country. If you want to navigate the terrain successfully, then it’s imperative that you learn the language. Cap rates, net present values, fair market values, cash-on-cash returns, and 1031 exchanges are just some of the things that real estate investors deal with. If you must take a course to understand and speak the lingo, don’t hesitate to do so.
- Have an investment goal
Once you have equipped yourself with real estate knowledge, it’s time to set some goals. Take time to evaluate what you want to achieve with your investment. This will help you develop the guidelines you must follow to reach those goals.
Are you investing for an early retirement? Would you like to launch a new startup soon? Without a clear goal of what you want to accomplish, your investment efforts will have no clear direction, and the challenges you encounter along the way will be more difficult to overcome.
- Build your brand
You have to make people believe that you are a reliable investor with the means to back up what you promise. Check your credit report and make sure you have a 700 or better FICO score. Pay off your debts first and keep your debt-to-monthly income below 36 percent of your gross. A spotty financial record could discourage your target market from working with you.
Aside from your financial capabilities, your reputation will also matter. Expect to be compared against others in your field. It’s not just about snapping up properties, it’s about building your brand and positioning yourself to attract others who align with your vision, values, and goals.
- Don’t be afraid to start small
While it’s true that real estate investing required hundreds of thousands of dollars in initial investment in the past, this is no longer the case today. With a solid financial plan, it’s possible to become a successful real estate investor with minimal capital.
You also don’t have to purchase a five-story commercial complex right from the start. In fact, if you’re just getting started with buying investment property, it’s best to smart small—even a studio unit will do. If it’s in the right location and you’ve done your research on the market, it will give you a good return on your investment.
- Treat your business as a business
As a new investor, it’s easy to fall into the trap of getting emotionally attached to your business. You’re putting so much sweat and hard work into it after all. Then you find yourself drained from entertaining clients’ calls all the time and you realize that you’re spending less and less time with your loved ones.
Many investors lose interest or get burned out this way. Don’t make that mistake. Real estate investment is a business, and you need to treat it in a way that impacts both your work and personal life positively.
At 606 brokers, we consider it our mission to empower people to make the best real estate decisions possible. We can provide you with all the tools necessary to make your best real estate investments. Reach out to us today. Call 773.870.5101 for inquiries.