What Does It take to Get Started in Real Estate?

This post may contain affiliate links. Click here to read my full disclosure.

Real estate is one of the best ways to start building serious wealth. It’s not as passive as investing in the stock market, but it’s also not as risky, and it’s something you potentially have more control over.

If you’re considering getting started in real estate and aren’t sure exactly how, consider these tips on the best ways to get started and avoid some serious blunders.

Capital

The first thing that you’ll need is, of course, capital. As the old adage goes, you’ve got to spend money to make money, and naturally, real estate is no different. If you’re buying land or a building, the prices can be pretty substantial if you’re not totally flush with cash. Land values can vary significantly by state in the US: as low as $2000 an acre in some states, and as much as $2 million in the most coveted areas.

Texas is a fairly popular place to buy land these days (more on this aspect of real estate in a minute), so let’s suppose you’re buying land there. Consider these options for gaining enough capital to buy a bit of land:

1. Small business loan: if you’re thinking of starting a house-flipping business, like the famous Chip and Joanna Gaines of Magnolia.com in Waco, a small business loan may be the best option for you. Be sure that you bring in a solid business plan when meeting with your advisor.
2. Mortgage loan: if you’re really just dabbling and don’t have a full plan for how to scale your real estate business, don’t worry – you might consider just taking out a regular mortgage to pay for that first property. You’ll want to be sure your credit score is up to snuff in order to get an interest rate that’s competitive. If you don’t have the credit score, however…
3. Hard money loans: it’s a riskier bet, but you don’t want to miss out on that excellently-priced property in that hot and growing location. You could consider hard money lenders in Texas if you really want to snatch that hot property! These will have higher interest rates, but if the return on investment is worth it, there’s no arguing with the profits.

Research

One thing folks just do not spend enough time on in the early phases of property development and real estate acquisition is research. You need to know what the current and past market trends are, as well as what the most reliable forecasts have to say about the future.

You should also think a lot about where you’re buying property. It might be tempting to just buy some land or a condo or a complex in your city or town, but you could be missing out on some serious opportunity for better returns on investment elsewhere.

These days, it’s easy to research, purchase, and even maintain property that’s far from home. Some areas in the USA that are currently growing that you should consider, no matter where you’re located, are:

• Texas
• Nevada
• Utah
• Florida
• Arizona
• California

More people means more demand for land and property, so getting in early on a city that’s growing fast can mean serious and rapid returns on your investment. Do ample research before committing, and be sure that the growth patterns in your city of choice are sustainable. You don’t want to be caught in a bursting bubble.

Risk tolerance

The last thing it takes to get involved in real estate is risk tolerance. The fact of the matter is that investing is inherently risky; that’s where returns on investment come from in the first place. You need to be sure that you are both aware of the risks and okay with them.

No one can tell the future, and it is possible that you lose a lot of money on a bad bet. However, without that risk, you’d never stand to reap the rewards. Plus, by doing your research and being smart about where you acquire your initial capital, you can seriously minimize the amount of risk you face.

Be sure to talk to a financial planner before liquidating your assets and investing in property. It may be a wise move, and one that sets you ahead, but it could also be too big of a risk. Only you and your planner will know your situation well enough to tell.

Be careful, be savvy, and good luck investing!