Blog | Real Estate

Successful Real Estate Investing Tips

Interested in learning proven strategies for succeeding as a real estate investor? Here are some proven professional tips.

It’s been said that if you’re not growing, you’re dying. That’s why it’s so important to become a lifelong student in this game of life. Of course, it’s not just about spending time and money on a traditional education (unless you really want to) — it’s about reading books and articles from trusted news sources, and learning from successful people in your industry who are living the life you want for yourself. This is especially true when it comes to real estate investing.

Staying up-to-date on changes in the real estate industry is essential in becoming an expert in the field, especially when your money is on the line. It’s important to be in the know, because investment rules and methodology change over time. Being rigid in your thinking, and using the unchanging strategies decade after decade is not the key to success.

Instead, it’s better to seek knowledge from trusted advisors and then apply these new learnings to your overall real estate strategy. That means you’re constantly evolving your tactics to make sure you remain in the growth mode. Here are some top tips that our Rich Dad experts have used to contribute to their overall success.

Buy your own property first

Are you still renting an apartment? If you’re new to real estate investing, consider buying your own property to live in first.

First of all, it will give you front-row seats to everything you need to know about real estate investing. You’ll never know all its nuances until you’ve experienced it first-hand. Also, the financing is easier (you’ll need less of a down payment and will find better interest rates) and you’ll get the best tax write-offs. A few years later, you can upgrade to a new home if you wish, keeping your original property as a rental for cash flow. What a great way to get started on your path to financial freedom.

Focus on numbers, not emotions

It’s far too easy, especially when you’re new to real estate investing, to let fear and greed drive your investment decisions. As with any business situation, it’s best to check your emotions at the door. The best way to do this is to bury yourself in the numbers. Research the cost of each investment opportunity beyond just yield and CAP rates. Look at such factors as the cost of vacancy, maintenance charges and also assess the risk profile of your tenants. Don’t forget to factor in your own risk tolerance (be honest with yourself!), which will lead to increased confidence when you’re ready to sign on the dotted line.

Speaking of numbers, don’t be intimidated by them.

If you intend to be financially fit and reach your financial dreams, then you’ve got to become very comfortable with the numbers. Stop being intimidated by them — if you can add, subtract, multiply and divide (your cell phone has a calculator, right?), then numbers can be your new best friend along this journey. Once you rid yourself of any negative and unsupportive thoughts about numbers, math, finances and money, you’ll quickly discover their power.

A number by itself means nothing. Instead, look at the numbers as clues. The numbers do not exist to confuse you. They exist to give you clues for solving the “mystery” of investing. The numbers are clues to guide you to discovering the truth. What is the investment? How is it really performing? How can we expect it to perform in the future?

For instance, the number 10 means nothing on its own. But if that number represents the number of vacant units in a 20-unit apartment building you’re considering buying, now it means something substantial (a 50% vacancy rate). Get comfortable with reading the three main financial statements (income statement, balance sheet and statements of cash flow), and you’ll be well on your way to using these numbers to tell a story and solve the mystery.

Build a world-class team you can trust

One sure way to keep your real estate investment returns small and your opportunities for growth limited is to try to do everything yourself. The fact is, even with tremendous effort, no one can know everything there is to know—much less do everything there is to do—in an area as complex as real estate investing.

So it’s crucial that you work only with trusted resources. You would only leave your child with a trusted babysitter, right? And you’d probably only let a trusted housekeeper clean your home or a trusted hairdresser color your tresses, right? Yet you’d be surprised by how many people take financial advice from complete strangers — people that haven’t been vetted and haven’t earned their trust. Yes, you can get advice anywhere, but why would you?

Instead, surround yourself with people you know and trust. If you have full confidence in the people you will rely upon throughout the real estate investing process — such as a banker, any co-investors, a broker, even your handyman — then you don’t have to reinvent the wheel each time (and risk getting burned) and will sleep more soundly at night. Treat these relationships like gold.

This means you’ll need to do your homework. First, find out if they are successful at doing what you want to do. Just because they’ve found success in other areas of their life or business, doesn’t mean they have any success in real estate investing. Next, determine if they practice what they preach. Many advisors will give advice to others, but do something entirely different themselves. Ask yourself why, and look for people who actually follow their own advice. Next, see if you can figure out what the source of their information is. Ask where the data is coming from, or if they get a commission by pushing you in one direction or another. Finally, figure out how they get paid, so you know whether you can trust them or if they are simply pushing their own agenda.

As a beginning real estate investor, one can lack the overall understanding of the real estate investment process, and so they tend to be too cautious, too arrogant (and hence, too careless), or simply just be lost in the world of real estate investment. That’s why the best insurance against making unnecessary mistakes (because there are mistakes that are indeed, very necessary for the learning process), is to leverage the experience of others.

Some new real estate investors argue that, if they do all of the work themselves, they’ll be able to retain a higher percentage of whatever they earn. While that may be true on the surface, what these individuals fail to realize is that the right partners can increase the returns obtainable in investment ventures—sometimes dramatically so.

Be Strategic

When it comes to your real estate strategy, it’s critical to be methodic with your process, specifically when it comes to taxes and legalities.

Planning your tax strategy

Because the government treats real estate investing as a business, you can deduct a wide variety of direct and indirect expenses that are associated with managing and maintaining a property. Unfortunately, unless you’re a real estate or tax accountant yourself, you’re not likely to have all of the information you need.

Having a financial team to help you craft a real estate investment tax strategy ahead of time can maximize the returns you receive from your real estate investments—and legally and legitimately minimize the taxes that you owe on these activities.

Planning your legal strategy

Owning real estate can be a very lucrative method of generating income. But real estate ownership, like many business pursuits, comes with some significant legal risks. Managing these risks, therefore, are a key aspect of becoming a successful real estate investor.

These factors make planning a legal strategy an essential complement to creating a real estate tax strategy - especially in cases where insurance and a good lawyer aren’t enough.

Start small

Kim’s first property investment was a small one. It was a two-bedroom house in Portland, Oregon. At the time, she was terrified of the idea of purchasing that property. Though she was only spending a few thousand dollars, that initial step felt like she was giving everything towards it.

The takeaway? S tart small with your first investment. However, lthis doesn't mean you should think small. Quite the opposite: You should think big when it comes to where you want to go and what you plan to achieve.

Once you've got your big goal, break it down into smaller steps. Start with the smallest step. Keep moving forward, first with little steps, small investments, and then progress to bigger steps. As your experience and confidence grow with each success — and yes, even with the inevitable setbacks — you will get closer and closer to that big goal.

Remember who you serve

It’s important to keep in mind that as a real estate investor, you’re in a customer-facing business. You have to be careful not to take this emphasis on money too far, because you want to protect not just your near-term cash flow, but your long-term income as well.

For that reason, serve your tenants well.

Take care of your customers, and make sure they’re happy. This means simply providing clean, neat and well-maintained housing; regularly inspecting rental units, and respond in a timely manner with courtesy when any problems occur.

The house in Portland was Kim’s first step in a much larger journey. She had grand dreams, but they started with 800 square feet. Today, she owns thousands of rental properties across the country — but it started with a small investment and a big dream.

Practice and perfect your patience

Admit it, you love watching those “flip and sell” shows on TV, but so few things on TV accurately depict the real world. Your best investment strategy for 2023 is not to flip a property and grab the one-time profit (assuming you don’t take a loss), but to turn it into a rental property investment that will deliver ongoing cash flow straight into your bank account every single month.

So, focus on your long game when it comes to real estate investing, and that means buying, holding, and trading up (eventually). The same goes for choosing the right investment opportunity — if something seems too good to be true, then it probably is. Don’t be in such a rush to nab your first investment property that you overlook red flags and ignore your gut instincts.

Real estate, similar to many other industries, is dynamic. It’s a living, breathing force. If you’re light on investment experience, then make sure you’re being conservative as you increase your knowledge and build your self-confidence. Once you gain a better understanding of the intricacies of real estate investing, then staying abreast of new changes will be much easier. Real estate investors who are able to adapt will thrive, and it’ll also put you much further ahead than the competition.

Stay in learning mode

Successful investing will not happen overnight. There is no such thing as a get-rich-quick scheme that lasts. The hottest tip is, instead, to live in learning mode.

Think of investing as learning a new language — you simply can’t become fluent in one day. You start by learning a few words and phrases, and then keep expanding your vocabulary. You immerse yourself in the process. You practice over and over again, attempting simple conversations at first. You will probably flub some grammar rules and misuse words, which can be embarrassing, but that’s OK. Over time, your conversations will become more complex. You’ll make fewer mistakes. Eventually, if you stick with it, you’ll become fluent. Investing is no different.

Nobody likes making mistakes or being embarrassed, sure; but if you’re observant, each time you make a mistake when investing, you’ll learn from it. And hopefully you won’t repeat it. By living in a constant learning mode, you’ll pave the way for future successes — and you’ll appreciate them that much more!

Because nothing in life stays static, your goal should be to stay ahead of the game. You’ll do this by closely watching market trends and absorbing industry news, so that you know when the rules change and are ready to react immediately.

3 Golden Learning Opportunities

Strive for keeping a variety of resources in your arsenal, because it ensures you’re getting a well-rounded ongoing education. These might include:

1. A real estate class. Workshops are not only a great place for beginners to start, but they are equally valuable for seasoned professionals. Classes will help open your eyes to opportunities you may not have considered before, maintain your edge, and introduce you to other like-minded individuals who could someday serve as partners or mentors.

2. Reading. You should be reading the newspaper or trusted industry blogs each day to find out the latest news in the world of real estate investing — market conditions can turn, tax laws can change, and industry outlooks can shift. You certainly don’t want to be in the unfortunate position of being the only one who’s not in the loop.

3. Jumping in. You can read and attend classes until the cows come home, but at some point you need to take the plunge and make a small investment. Doing is truly the best way to learn anything! Yes, you’ll make a few mistakes and yes, you’ll probably lose a little sleep in the beginning — but with time (and continuing education), you’ll gain confidence, experience success, and grow your portfolio.

So why haven’t you started investing yet? Perhaps it’s because you’re hoping someone will serve up the perfect investment opportunity on a silver platter! Well… that isn’t happening. Why? Because successful investors understand this one fundamental truth: Investing is a process.

Continued learning takes effort, but eventually, it’ll pay off in spades. Once you see the money rolling in each month, you’ll be even more excited to dedicate time to learning and perfecting your new craft.

To get started, download your copy of Rich Dad’s eBook, How to Buy Your First Investment Property for free!