How to think like an experienced real estate investor, even if you are new.

Dated: September 20 2022

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In today’s competitive market, new real estate investors cannot afford rookie mistakes. You need to think like an experienced real estate investor and make sound choices right away. 

However, the most important tips can only be learned from experience.  As an experienced investor, I have learned a lot along my journey, sometimes through hard lessons. 

You can avoid my longer detours with careful planning and a business mindset, right from the beginning. 

Allow me to offer my best tips to give new investors a boost to success.


Why invest in real estate?

If you are not yet sold on real estate investments, consider two key reasons: leverage and appreciation.

Unlike other investments such as the stock market, you do not need all of the cash up front. For only a percentage down, you can own a high ticket item and make money from it immediately. 

For instance, say you purchase a property for $500,000 with 5% down. For $25,000 in cash, you immediately start reaping the benefits of a $500,000 investment. 

To get the same level of investment in the stock market, you would need that entire $500,000 in hand.

Furthermore, your investment appreciates as time passes and your equity grows. Over the course of time, real estate prices most often trend upwards. The real estate market is less volatile than stocks or other investments, slower to make large drops, and ultimately bounces back after dips.

If you invest that $500,000 into the stock market, that’s a lot of money to risk losing if there’s a crash in the market. 

In real estate, though, you are actively earning rent along the way, and if you keep up on trends throughout the country, you likely will get a heads up before prices begin to fall in your area, allowing you to make an informed decision about whether to sell or keep your properties.

Let’s get started!

Prepare your strategy

Approach real estate investments like a business. It is important to have a clear plan, goals and systems in place. Just as any successful business needs preparation and a solid business plan, you need a plan and to prepare before you embark on your real estate investment adventure. 

Clean up your personal finances

The first step in investing is to get your own finances in order. You need to give yourself the strongest financial position possible. 

Consider these questions:  

  • Can you consolidate or pay off some debt? 

  • How competitive is your credit score? 

  • Do you have enough savings or capital for a down payment?

Once you fix any holes in your finances, then it’s time to move onto the “business plan” part of preparation.

Define what you want

Part of this business owner mentality is to know your numbers. What do you want and need to get out of a property?

An experienced investor knows research is crucial before investing. Ensure you have a solid understanding of the market, rental property management and investing in general before diving in.

Consider the costs you will undertake, such as repairs, property taxes and monthly costs. Anticipating and reducing expenses is key to making your investment profitable.

Patience is key. You do not need to pounce on the first property you see. Be smart and only invest in properties that you truly believe will benefit you. 


Chose a property based on the potential cash flow

Remember that the whole point of investing in real estate is to make a monthly income. If you buy the right piece of property, not only will your rental income cover the property’s mortgage, but the extra cash flow will be your profit.

Is your investment producing at least 10 percent higher income than your expenses? If not, it may be time to consider letting it go so you can cut your losses and reinvest into a more profitable property.

Also remember that you have the power to increase your profitability and value of your investments. If a property has below-market rent when you buy it, you can invest in some upgrades so you are able to increase the rent, all while simultaneously increasing the value of the property.


Think beyond your hometown 

We know that real estate is all about location. However, new investors limit themselves because they are more comfortable looking for properties close to their own homes. 

To think like an experienced investor, do not be afraid to expand your search further. What areas would offer better opportunities?

These days, there are so many property management options and resources that you are not limited by distance. Owning properties further away from your central location is easier than ever. 

Even if you live in New England or out West, it is absolutely possible for you to invest in South Florida real estate properties.


Build relationships

Experienced investors build relationships wherever they go. You never know who might hold the key to your next investment opportunity. 

It is also critical to have good relationships with plumbers, electricians, handymen, real estate agents, other investors, roofers and people from all kinds of professions. 

New investors should view their world with new eyes and always keep business cards on them for whenever they meet a new contact.


Diversify your investments

Even as a new investor, consider diversifying your investments. 

Expert real estate investors understand that there are unique benefits to different kinds of properties. Therefore, it creates much more security to have some of each kind, instead of completely relying on just one type of property.

For instance, many new investors start with your typical single-family home. This can be a good investment because: 

  • They usually require less money up front

  • You only have to worry about a single tenant at a time

  • They can be less expensive to upgrade and repair


On the other hand, multifamily homes – such as a duplex, triplex or fourplex – are beneficial because they provide multiple rents at once. Even if one tenant moves out, you still can receive monthly income from the other units until you are able to fill your vacancy.

You could also consider adding a vacation rental to your portfolio, for these five reasons.


No matter what kind of property you choose to invest in, Royal Empire Realty is here to advise you on your investing journey. 

We live to help investors, both new and experienced, expand their Empires one property at a time! 

Blog author image

Melissa Donnahoe RENE, E-Pro, SFR

"Discover Your Real Estate Dreams with Melissa Donnahoe | Broker-Owner of Royal Empire Realty"Welcome to Melissa Donnahoe's world of real estate expertise! As the distinguished Broker-Owner of Royal E....

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