As an aspiring investor in the real estate industry, you might be hesitant to commit to your first investment. You don’t want to put all your eggs in one basket, especially right away.
There are many factors to consider before investing in a property or housing opportunity, and it’s important to start slowly before diving in blindly. It’s a good idea to test the waters, so to speak, to make sure it’s the right path for you.
To help, 15 members of Forbes Real Estate Council share simple ways first-time investors can dip their toes into the world of real estate investments.
1. Become A Passive Investor
In regard to multi-family housing investments, first-time investors often invest as a “passive” investor in their first deal. This allows an experienced investor to lead up the investment and reports to their shareholders. This helps passives understand the ins and outs of how a property performs and low points that can affect performance of the returns. – Caroline Kane, CKR Property Management, LLC
2. Partner With An Experienced Investor
Partnering with fellow investors who are more experienced than you will provide enormous value. Creating these relationships can help you with your first investment decisions, review your projections and discuss the real-life implications of your choices. Consider these relationships the keystones of your community of trust and hang on to them like gold. – Matt Picheny, Picheny
Forbes Real Estate Council is an invitation-only community for executives in the real estate industry. Do I qualify?
3. Find A Mentor And An Attorney To Guide You
Learn from project deal flow, sponsor backgrounds, projected risk and returns on crowdfunding sites, webinars/conferences that evaluate projects, transactional structures, funding and value creation plans. Assess your skill set, access to capital and partnering opportunities. New investors need experienced advisors, mentors and an experienced real estate attorney to support and advise them. – Anne Keshen
4. Mitigate Your Individual Financial Risk
Start small by partnering up with an experienced investor so you mitigate your financial risk. We all had to start somewhere. Many newbie investors jump into this solo and get burnt out or are over-leveraged without the experience. Get creative in working with a seasoned investor. You can hire them to coach you or partner up on a deal to observe and take note of how they operate. – Pam Scamardo, TPK Properties LLC
5. Start With A Multifamily Property
My in-laws came to this country with limited skills after working heavy industrial jobs their whole lives. They invested, started small and bought what they knew. A duplex or other multifamily property can be a wonderful soft entry into commercial real estate with limited risk. Live in one unit and rent out the other unit. Learn, grow and take your winning strategy to gradually larger properties. – Charles Argianas, Argianas & Associates, Inc.
6. Explore Up-And-Coming Markets
Start small in an affordable market that is beginning to pick up or expected to pick up soon. To do this, get advice from an experienced investor who has the background and data to help you identify where and what to buy. – Kevin Markarian, Marker Real Estate
7. Consider A Real Estate Investment Trust
Start with something simple and relatively low-risk like a Real Estate Investment Trust (REIT). By taking the day-to-day management hassle off the table, you can get an idea of the types of returns to expect and the market for real estate in certain geographies. This will form the basis of knowledge you’ll need to expand into more targeted, risky and lucrative investments in the future. – Megan Micco, Compass
8. Lock In A One-Year Tenant
Choose a property in a neighborhood that offers low vacancy loss and ensure that the purchase includes a tenant lease that is in place for at least one year from your purchase date. This will give you the opportunity to have immediate cash flow as well as secure your cash flow once the lease expires. – Mor Zucker, Team Denver Homes – RE/MAX Professionals
9. Turn Your Own Starter Home Into A Rental Property
Not sure if real estate investing is right for you? When you are ready to move on from your first home, get your feet wet by hanging onto it and turning it into a rental property. You are already familiar with the property, aware of its condition, monthly costs and needed repairs; it can become an excellent foundation for your rental portfolio. – Tara Hotchkis, Compass
10. Buy Into A Limited Partnership
For new investors, you can learn the ropes and limit your risk by buying into a limited partnership specializing in real estate investing. Follow their quarterly updates to see how they manage their properties, structure their business plans and report their profits and losses. Learning their strategy is a great way to then create your own strategy based on their expertise. – Jennifer Anderson, Anderson Coastal Group
11. Look For Fractional Real Estate Deals
If you’ve invested in stocks and bonds, you probably realize real estate is different because it’s a physical asset. For your first investment, consider fractional real estate investing to get a taste of the return profiles. If you want to buy your own investment property, some say buy local first, but you can also find a reliable property manager to handle the day-to-day tasks and find investments for you. – Chuck Hattemer, Onerent
12. Help Other Investors Find Leads
I tell clients to start out by bird-dogging leads to other investors. This gives them an opportunity to learn about marketing and lead generation (which are key to this business) without risking any large sums of money. – Melissa Johnson, webuyhousessanantoniotx.com
13. Shadow A Current Investor
Get a mentor and shadow someone currently investing. See how they approach their work and the attributes that make them good or bad at what they do. – Jammie Jelks, JelksMBA
14. Start With A Small Property
Start small. While it is without question difficult to start small in real estate investing, the processes and burdens of owning investment real estate are very similar if not more difficult for smaller properties. Smaller properties often require the personal attention and care of the individual investor while larger properties can garner that attention and care of professional property managers. – Richard Lackey, City Commercial Real Estate, Inc.
15. Set A Budget And Go For It
Budget an amount you don’t mind losing and give it a spin. Think of it like a roller coaster ride. When it’s all done, you will know if you want to ride again. – Joseph Edgar, TenantCloud