Getting Started Investing In Real Estate (Everything You Need)

With just about anything in life, starting is the hardest part. Investing in real estate is no different.

If you have been struggling to take the first step in your real estate investing journey – whether due to fear of the unknown or failure, or just not knowing where to start – it’s okay. Don’t beat yourself up because there are millions of other people in the exact same situation (I was too for a long time).

With that being said, today is the day when you take your first (or next) step forward! It’s time to invest in real estate.

The following is a step-by-step process you can follow to actually start investing. If you follow this process you will make real progress toward your real estate investing goals in the next 90 days. As you’ll learn in a moment, just by reading this, you’ve actually already started (which means the hardest part is over!).

Perhaps the most important part of this process though is the limitations it places on you. This is particularly helpful for those of us who are prone to “analysis paralysis,” and yes, I am one of those people. I wasted years creating endless spreadsheets, analyzing investment properties, and bouncing from one real estate idea to the next, when I just needed to start investing.

So, without further ado, let’s get to it!

IN THIS ARTICLE 

Decide Your Investment Criteria

Choose an Asset Class

Define Your Real Estate Investing Goals and Your “Why”

Trust in Your Ability to Figure it Out

Start Networking with Other Real Estate Investors

Educate Yourself About Investing in Real Estate

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Educate Yourself About Investing in Real Estate

It all starts with learning the right things about real estate investing.

The commitment to educating yourself is made up of two (2) parts:

• The first part is to commit to at least fifty (50) hours of learning about the basics of investing in real estate.
• The second is to commit not to spend more than 100 hours learning about investing in real estate, before moving on to the later steps.

One of the best parts about starting this process today is that there are essentially limitless resources you can use to educate yourself. Some people like to read, some like to listen, some like to watch – it’s all available (mostly for free) to you and it all works.

While learning is extremely important, it can also hold people back. There will always be something more and something new to know. If this feels overwhelming, keep in mind, you can be an expert in a particular area of real estate investing and still not know everything.

Some of us are prone to getting stuck and failing to take action because we feel like there is still so much we don’t know. We fail to buy our first piece of investment real estate because we have not figured out how we are going to buy our third piece of property. Analysis paralysis is real.

There is also just so much information out there these days about the limitless number of real estate investing niches and strategies, all of which are competing for your attention. Should you invest in residential properties? Is commercial real estate a better investment? Or, is flipping houses the way to go? There is no wrong answer, but you do have to choose one (otherwise you will never actually start investing).

When it comes to education, it can also feel like if you are learning, you are making progress. In reality, there comes a time when continuing to learn about the processof investing in real estate is holding you back from actually investing. You do not want to fall into this trap either.

This is why it’s important to put an upper limit on the number of hours you are going to allocate to just education, at least at the beginning. Generally, unless this blog is literally the first real estate investing information you have ever come across, I believe 100 hours is the maximum amount of time you should spend just learning, before moving on to taking action.

To get you started, here are links to a few of my favorite real estate books, podcasts, YouTube Channels, and Blogs.

Books

• Rich Dad Poor Dad – You’ve undoubtedly heard about it, but have you read it yet? This book put into words so many of the concepts that had been floating around in my head since I was a kid. It is conceptual, rather than practical, but it is one of the most classic real estate books of all time.

Rich Dad Poor Dad is not going to walk you through the process of calculating your anticipated property taxes, or the exact down payment you need to save before buying a piece of rental real estate. This book is aimed at shifting your thinking away from an “employee” mindset, and toward an “owner” or “investor” mindset.

• Landlording on Autopilot – The author managed 75 properties while working full-time as a police detective. I use a lot of the same systems outlined in this book to manage our rental real estate. This is a must-read for all rental property owners, particularly those who are not interested in hiring a property manager.
• The 4-Hour Workweek – A classic book focused on concepts of time management. While the book is not about real estate investing strategies specifically, the concepts it discusses are invaluable to real estate investors.
• The Millionaire Fastlane – The concepts in this book are not limited to real estate investing, but they are extremely helpful for and applicable to real estate investors. The Millionaire Fastlane is all about the importance of developing a scalable business. And yes, real estate investments are highly scalable.
• Set For Life – If you are just starting out, or if you need help getting your finances in order generally, this book provides an excellent foundation.

Set For Life provides some great advice on how to save money for a down payment, manage student loans, as well as the importance of improving your credit score.

The book talks a lot about “house hacking,” which is the process of buying a piece of residential real estate, typically a multi-unit property, living in one of the units, and renting out the other. From there, you use the rental income you collect to subsidize or eliminate your monthly housing expense.

With that being said, if you are already a little further along financially, this one may be too rudimentary for you. 

Podcasts

Bigger Pockets Real Estate Podcast – One of my favorite real estate investing resources. The interviews are invaluable for new and experienced investors alike. Regardless of whether you are interested in residential real estate, commercial property, self-storage, mobile home parks, or even real estate investment trusts, Bigger Pockets has many excellent podcasts for you.

YouTube

Graham Stephan – Graham’s channel has expanded beyond just real estate, but all of his old videos are still available. He got his start making money as a real estate agent who bought an investment property.

Graham has lots of videos and resources that talk about how to invest in real estate, calculate rental income and the profitability of a rental property, as well as lots of general financial tips. Now he owns tons of properties, invests heavily in the stock market, is well-versed in crypto, and makes millions of dollars on YouTube. One of my favorite finance-related sources!

MeetKevin – Kevin talks a lot about the stock market today, but he got his start in real estate investing and now has a net worth north of $50 million dollars – pretty amazing. He also worked as a real estate agent. As with Graham, Kevin talks a lot about how to buy rental property, calculate operating expenses, generally just build wealth.

BiggerPockets – In addition to the podcast episodes, BiggerPockets has lots of great real estate investing information on their YouTube page.

Real Estate Investor Blogs

There are also countless real estate investing and personal finance blogs out there to help get you started:

• Rentals to Wealth – Building long-term wealth through rental properties.
• Financial Samurai – Slicing Through Money’s Mysteries
• Millennial Money – Next Level Personal Finance
• Good Financial Cents
• Millennial Revolution – Stop Working. Start Living
• Part-Time Money – Make Extra Money in Your Free Time
• Financial 180 – Turn Your Finances Around!
• Early Retirement Extreme – a combination of simple living, anticonsumerism, DIY ethics, self-reliance, resilience, and applied capitalism
• Get Rich Slowly – Personal finance that makes sense
• ESI Money – Three Simple Steps to Wealth
• Free Money Finance
• Retire by 40 – Financial Independence and Early Retirement
• Michael Saves
• Mr. Money Mustache – Early Retirement through Badassity
• Physician on FIRE
• DiverseFI – Personal Finance With a Twist

Keep a Record

When it comes to learning about real estate, the final trick I have for you is to document your time. I like to keep a paper journal of the time I’ve spent learning, what I’ve learned, and what new ideas or questions I have based upon what I just learned. A notes app on your phone works just the same, whatever works for you, just make sure to document.

Creating a written record of your learning serves three (3) purposes:

• First, you will have a written resource you can look back to for answers when issues come up. It will also help you remember where you learned a particular piece of information, in case you need to go back and dig deeper. I can see it now: “Hmmm, where did I learn that process about how to analyze a real estate market?” Just check your notes!
• Next, you will also feel more confident seeing a written list of everything you have learned and the work you put in.
• Finally, your record will keep you focused and accountable, making sure you hit the fifty (50) hour minimum, but not exceeding the 100 maximum. Learning is extremely important, but if learning is all you ever do, if you don’t move on, I promise you won’t get where you’re hoping to go.

Final Thoughts on Education

You may be thinking, “Ben, I have heard so many successful people attribute their success to the fact that they ‘never stop learning’ or that they ‘read a book per week,’ if that’s true, how come you’re limiting me to 100 hours?”

Great question, but don’t worry! This “100 hours of learning” cap will not be your limit forever. This limit only applies until you begin taking additional action as outlined in the next few steps.

After you dive in, take action, and make more progress toward your goals, feel free to reopen those books or refresh that YouTube Channel.

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Start Networking with Other Real Estate Investors

The next step in the process is to start networking.

In some ways, this may be even more important than any of the books, podcasts, or blogs mentioned above. Meeting the right person can catapult your real estate investing career forward.

How to Network to Right Way

The idea of “networking” often gets a bad wrap. For many, networking means engaging in meaningless small talk at stuffy events with fake people. This kind of network is painful and largely worthless. If this is what comes to mind for you, it’s okay, but you need to change your mindset.

Networking is not about collecting as many business cards as possible or filling up a Rolodex (or contacts app) with hundreds of names. Your networking should be focused on making a few genuine “real estate friends.” These are people who you legitimately enjoy spending time with, who you respect, who are also either already investing in real estate, or interested in investing in real estate.

You want to try to make at least three (3) of these real estate friends:

A friend with the same experience...

First, you want to try and befriend another investor with the same amount of experience as you, i.e., they’ve done their homework, they have a handle on the basics, but they are still early in their investing career. Given that you are on the same step of the real estate investing journey as this person, you two are going to be dealing with many of the same issues. You will be able to work through issues together, and you will each benefit from one another because you are similarly situated.

A friend with more experience...

Next, you should try to become friends with an investor who has more experience than you. This is someone who has done a number of real estate deals already. Given that this friend has more experience than you, it’s best to find ways that you can add value to their investing. Can you bring them a real estate deal? Can you help out with their property management? Can you introduce them to a real estate agent that you know that works with investors? These are all ways to bring value to someone who has more experience than you.

A friend with less experience...

Finally, as you continue to develop as a real estate investor, make sure you befriend a fellow investor who has less experience than you. This step may come a little later, but it really will not take long until you have enough skills and experience, particularly about your local real estate market, to help someone else on their journey.

Where and When to Network with your Real Estate Friends

Once you start the process of networking the right way, you can keep the momentum going by finding an accountability partner, going to real estate meetups, or even starting one of your own!

Accountability Partner

For new investors, finding an “accountability partner” is an invaluable part of the networking process.

An accountability partner is simply another real estate investor friend who agrees to help hold you to your goals, and who you can help do the same. It works best if you both have around the same amount of investment experience.

Work together to develop a real estate investment plan that fits your goals, and help your partner do the same. Schedule monthly check-in calls by setting up recurring events on your calendars. This will allow you to help one another track the progress made toward your real estate investment goals. Be supportive, but tough!

Finally, even if you both are interested in the same types of real estate investment properties, it’s okay. There is more than enough opportunity to go around.

Real Estate Meetups

Real Estate Meetups are a great way to network with other investors. Meetups are simply get-togethers where attendees talk about their real estate projects and share investment advice.

There are a number of ways to find real estate meetups in your area. You can start by checking BiggerPockets Real Estate Events and Happenings page. From there, search on Google, Facebook, and other social media to see if there are real estate meetups or events in your area.

If an experienced real estate investor already hosts such an event, you’re in luck! If a meetup does not exist in your area, even better, you can start one! Simply set up a Facebook Group and/or an event listing on BiggerPockerts and invite other investors to come to a restaurant, bar, coffee shop, or any other public meeting space at a set time.

Service Provider Specialists

In addition to your real estate friends, you also want to begin forming some connections with a few key service providers.

Insurance Agent (or Broker)

If you’re going to invest in real estate, you are going to need a number of different types of insurance. Finding a reliable and responsive agent will be extremely helpful. Also, it’s important to know the difference between an “agent” and a “broker.” An agent typically works for a single insurance company (and only sells insurance products offered by that company), while an insurance broker shops around and gets you quotes from multiple different companies or agencies. There are benefits to both, just make sure you understand who you’re dealing with when getting quotes.

Bank Lender

If you can get approved, a bank is always a fantastic place to start looking for financing. Banks are the most common place where you can get a traditional mortgage, e.g., a 30-year fixed-rate mortgage. Bank financing also often provides the best interest rates and is one of the only places you can get mortgages backed by the Federal housing administration, or FHA. FHA mortgages are a type of low down payment loan.

With that being said, banks often have a limited set of financial products they can offer you, and they are generally less flexible than other types of lenders. Also, if you do not have enough money for a large enough down payment, you will have to pay mortgage insurance, which is just another expense that will cut into your cash flow.

Hard Money Lender

A hard money lender can be anything from a single individual offering a loan to an investor, to a large financial institution. Hard money loans are typically short terms loans (3-18 months), which carry a higher interest rate than traditional bank financing. A hard money loan is most commonly used to fund the purchase of a property in need of significant repair – that a bank might not otherwise be willing to lend on – and then to fix it up.

Once the property is fixed up, a real estate investor can go to a bank and take out a mortgage on the property, which can be used to pay back the hard money loan. If you can get good at this process, this is one of the best ways to invest in real estate.

Real Estate Agent

Developing a relationship with a good real estate agent who has experience working with investors is a great way to find and analyze deals. A real estate agent can set up automatic alerts for you on the multiple listing service, or MLS. That way, every time a property hits the market, you will be immediately notified.

When you’re starting out, agents can also help you assess initial property value, comparable properties, and even after repair value, i.e., what a property is going to be worth after you fix it up. This will help you work backward and determine where you need the purchase price to be. Finally, a good agent can also help you quickly determine some of your other expenses for a property, for example, property taxes, as well as what you can reasonably expect to collect in rental income.

Property Managers

Regardless of whether you plan to self-manage your property or hire a professional, it’s still a good idea to know a property manager. While it is unlikely they will be willing to share their repair and maintenance people with you, finding out what a property manager charges in your area is still very valuable information. Even if you are planning to self-manage, make sure to include property management as an expense line item when you’re running your numbers. Even if self-management is your plan today, it might not be tomorrow.

Trust in Your Ability to Figure it Out

Don’t let next year’s problems stop you from taking action today.

Let me get a few things out of the way:

• When you are searching for your first investment property, will you know everything there is to know about your local rental market? No, you will not.
• When you are talking to a lender about a mortgage loan or an investment property loan, will you know for certain that you are getting the best rate and terms possible? No, probably not.
• When you buy your first property, will you know how to respond to every tenant issue that comes up? No, you will not.
• When something breaks and repairs need to be made at your rental property, will you know exactly who to call? You guessed it, nope!

And that is okay! As real estate investors and property owners, we need to be problem solvers – that’s all there is to it.

For years, I worked to create these extremely complex spreadsheets capable of analyzing any type of rental property. I built extensive databases of contacts and company lists for everything from garbage hauling services, to roofers, to plumbers and locksmiths. I even worked to set up a separate property management company, before I really even started to scale our investment portfolio. In my mind, I wanted to solve every problem upfront, so that the moment something went wrong with our firstrental property, I had multiple solutions.

One of the main jobs of a real estate investor is just responding to issues and problems when they come up. From tenant issues, to roof leaks, to financing questions. When something comes up, I don’t necessarily know exactly what I will do or who I will call, but I know I will figure it out. You can do the same thing.

When a problem presents itself, you will have your personal real estate journal, you will have Google, YouTube, and BiggerPockets, you will have real estate friends and contacts who can help figure out what to do. Just because you do not know exactlywho you are going to call when a tenant complains about a leaky toilet, doesn’t mean you’re unprepared.

For the past couple of years, I have gotten in the habit of using new contractors for almost every new job that comes up. It keeps me on my toes and reminds me that contracts come and go. I often just go on Thumbtack to see who responds.

You got this!

Define Your Real Estate Investing Goals and Your “Why”

You next need to develop a goal for how you want to invest in real estate. The goal should specifically define what you are trying to accomplish and a date by which it needs to be accomplished. Second, you need to draft a “Why Statement.”

Develop a SMART Goal

“A goal without a plan is just a wish.” – John, a wise man

You should start by developing a SMART goal with regard to your real estate investing.

A SMART goal is one that is Specific, Measurable, Achievable, Relevant, and Time-Bound. Let’s break it down!

Specific

Your goal needs to be specific. For example, your goal should not be “I am going to invest in real estate.” That is too general. A specific goal could be “I am going to buy a two (2) unit residential investment property, in the Pittsburgh area, for $250,000 or less, that cash flows at least $300 per month.” Now that is a specific goal that will make your planning easier, and much more effective. Successful real estate investors all have a specific goal they are working toward.

Measurable

Your goal needs to be measurable. Depending on how you plan to invest (as we’ll talk more about in a moment), you need to define what factors or measures will determine that you are making progress. Focus on lead measures, rather than lag measures. Lead measures are actions that you take that will help you reach your goal. Lead measures can be tracked on an ongoing basis and they are 100% in your control. An example of a lead measure is “I am going to work out ten (10) times this month.” The number of times you work out in a month is measurable and it is completely up to you. An example of a lag measure is “I’m going to lose five pounds (5 lbs.) this month.” While you can keep track of your weight, you don’t have complete control over this. If your goal is to successfully invest in real estate, focus on lead measures!

Achievable

Your goal needs to be achievable. While it is okay to set a goal that you have to stretch for, the goal still needs to be realistic and you need to have the tools and resources to hit it. While it would be great to buy a billion dollars worth of real estate next year, that probably isn’t an achievable goal. With that being said, most people overestimate what they can accomplish in one (1) year, but they underestimate what they can do in five (5) years. Keep this in mind as you are deciding what is an achievable goal.

Relevant

Your goal needs to be relevant. A relevant goal is one that aligns with your values, your long-term objectives, and your “why,” which we will talk about in a moment. If your long-term objective is to own tens of millions of dollars of commercial real estate, setting a goal to learn your local laws regarding all aspects of residential real estate probably isn’t the best use of your time.

Time-Bound

Finally, your goal needs to be time-bound, or time-based. You have to set a deadline for yourself as to when you are going to hit your goal.

Determine Your “Why”

Figuring out why you are committing to a goal is hard – but it’s essential.

People think about what they do all of the time. These are the jobs we do, the services we provide, and the stuff that we sell.

Some people go a step further and think about how they do things. They think about how they can better do their jobs, how they can provide better service, and how they can improve their products.

Almost no one thinks about why they do something. Why do they really do the job that they do? Why does their service, product, or company even exist?

The most successful people and companies all know exactly why they are doing something. Their “Why” is what defines the purpose of their work, service, or product. It is also what really differentiates them from their competitors, motivates them to keep going when things get tough, and even motivates others to join their companies and teams. Even if you are just starting out in real estate, you need this too.

When it comes to real estate investing, it will get hard. It will go slow. If you determine why you want to invest in real estate, really, it will keep you going when your investing is not going as smoothly as you wish.

Your “Why” should be clear and simple. Others have provided this outline for drafting a why statement: To _______ so that _______.

A few examples:

“To connect millions of people in real life all over the world, through a community marketplace – so that you can Belong Anywhere” – Airbnb

“To organize the world’s information and make it universally accessible and useful” – Google

Try Drafting a Few:

This will also help determine what type of real estate you should be investing in. If you are trying to provide affordable housing in low in XXXXX – certain types of commercial real estate would not align with your “why.”

Additional Reading on Determining Your Why (or purpose)

Start with Why: How Great Leaders Inspire Everyone to Take Action

Choose an Asset Class

When you’re getting started, you need to pick a single asset class and stick with it! This is not to say you can’t invest in other types of real estate assets later, you can. But, you need to become an expert in one area first, before moving on to the next.

The real estate industry is massive. If you try to chase every shiny new real estate investment opportunity, you most likely won’t end up buying anything – you’ll be stuck at the starting line.

While there are countless others, here is a list of the main types of real estate investments to get you started:

Single-Family Rental Properties

This one is pretty self-explanatory, a single-family property is a residential rental property with a single unit. The “single-family” descriptor usually corresponds to the zoning or occupancy status of the property, as designated by the city or local housing authority.

A great beginner strategy involves buying a single-family property, fixing it up while you live there, moving out and into a new property, and then renting out the first place. It’s not the fastest strategy, but if done correctly, this has the potential to give you access to some of the best financing options available.

While single-family properties generally do not cash flow as well as multifamily, there are lots of creative ways to make this a very lucrative investment strategy (think student housing or renting by the room).

Geography will also play a big role in determining whether renting single-family homes in your area is a viable investment strategy. In big cities it will be hard, in more rural areas it could be great – just make sure to run the numbers!

Small Multifamily Rental Properties

This category is comprised of all residential properties between two and four units, also known as duplexes, triplexes, and quadplexes. These types of properties can also be purchased as your primary residence, making them some of the best “house hacking” opportunities.

Rental properties with up to four (4) units can also still qualify for “residential mortgages.” Once you hit five (5) units or more, it technically becomes a “commercial property” from a lending perspective, which in turn requires a commercial mortgage product. While both residential and commercial loans have pros and cons, if you’re just getting started, sticking with residential lenders and loans is probably a good idea.

Overall, small multifamily rental properties are my favorite asset class for new investors.

Small & Large Apartment Buildings

Once you cross into “apartment building” territory, the definitions become a bit more fluid.

Generally, a small apartment building contains between five (5) and nineteen (19) residential units. Large apartment buildings are properties with anything over nineteen (19) units.

Another way of breaking down the difference between a small and a large apartment building comes down to management. While most apartment buildings have professional property management in place, large apartment buildings often have full-time, onsite property management, while smaller buildings do not.

Apartment buildings are also valued differently from small multifamily properties. In the residential real estate world, property values are determined by “comps,” or comparable properties to the one you are buying or selling. With apartment buildings, the value of the property is determined by a combination of the income generated by the property and the capitalization rate, or “cap rate.”

Student Housing

Student housing is a real estate asset class that has grown in popularity, and for good reason. College students are a captive market – they have to live somewhere, and that somewhere typically has to be close to campus! This makes student housing one of the most stable rental markets.

As schools become more and more competitive and expensive, the demand for on-campus housing has outpaced the supply in many areas. This mismatch between demand and availability has created an opportunity for investors who are willing to offer student housing. The high prices charged by universities for on-campus housing also serve to drive up the price of off-campus housing, which you can use to your benefit as a real estate investor.

While single-family rental properties traditionally do not produce the best cash flow, when you turn one into a student rental, the returns can be tremendous.

Commercial Property

Commercial property can be anything from office buildings or car washes to retail strip malls and restaurants. The possibilities are endless.

Like apartment buildings, commercial property is valued based upon the amount of income a property generates for its owners.

Additionally, the quality of a commercial tenant can make a huge difference when it comes to the value of the property. With residential real estate, most tenants are fungible, if one tenant moves out, you can typically just repaint the place and move another one in. With commercial real estate, tenants are not all created equal.

Take two (2) identical pieces of urban commercial real estate – exact same size, shape, access, etc. One of the properties has a struggling mom-and-pop drug store on it, the other property has a long-term lease in place with Walgreens. Both properties are listed for sale. Which one do you think is going to carry the higher asking price? The Walgreens property, of course!

With regard to commercial leases, there are two (2) main types: triple net leases and gross leases. A triple net lease means the tenant is responsible for paying real estate taxes, insurance, and maintenance/repair costs. A gross lease means the landlord is responsible for all of those expenses.

Good commercial properties with strong triple net lease tenants can be challenging to find, but they are a great way to get into commercial real estate because the cash flow is typically very stable.

Storage Facilities

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Special Purpose Real Estate

Special Purpose Real Estate is a general term used to describe a piece of property that has limited uses, value, and/or marketability, other than for its original “special purpose” use.

Some examples of special purpose real estate include things like amusement parks, bowling alleys, cemeteries, cold storage facilities, gas stations, golf courses, hospitals, hotels, marinas, museums, sports arenas, swimming pools, theaters, and wineries. While many of these are businesses in and of themselves, the land that they are built on is described as special purpose real estate.

REITS (Real Estate Investment Trusts)

A real estate investment trust, or REIT, is a company that owns, operates, and/or finances real estate properties.

A REIT pools the money of many investors to purchase large pieces of property.

There are three (main) types of REITS: equity REITS, mortgage REITS, and hybrib REITS. Equity REITS own and operate income-producing real estate. Mortgage REITS provide financing to real estate owners and operators. There are also hybrid REITs, which are a mix of equity and mortgage REITS.

The most common types of REITs are publically traded, like stocks, however, they can also be private.

REITs are a great way for individual investors to get exposure to the real estate sector without having to actually purchase a property. 

Notes

Note investing is a real estate investment strategy where an investor purchases a promissory note from a property owner. A promissory note is a legal document that promises to pay a specific amount of money, plus interest, on a certain date.

When you purchase a note, you are essentially lending money to the property owner in exchange for a fixed interest rate and a set return on your investment.

Note investing is another great way to get into real estate investing without having to actually purchase a property. With that being said, you still have to be just as diligent (or more) about the types of properties you lend on (and the people you lend to).

Real Estate Crowdfunding

Real estate crowdfunding is a newer real estate investment strategy that has taken the world by storm in recent years.

Crowdfunding is the process of funding a project or venture by raising money from a large number of people, typically through the internet. In real estate crowdfunding, investors pool their money together to fund a real estate project.

There are two (main) types of real estate crowdfunding: debt-based and equity-based.

Debt-based real estate crowdfunding is when investors loan money to a property owner in exchange for a fixed interest rate and a set return on their investment. Equity-based real estate crowdfunding is when investors purchase ownership in a real estate project in exchange for a share of the profits.

Real estate crowdfunding is yet another great way for individual investors to get exposure to the real estate sector without having to actually purchase a property.

Decide On Your Investment Criteria

Deciding on your investment criteria can be difficult because it’s an extremely personal process, what constitutes a good real estate investment for one person may not be great for another.

Investment criteria are a set of parameters that you decide on in advance that help you quickly and effectively determine if a particular real estate investment is furthering your goals, and should therefore be pursued.

Sticking with the example from before, a set of investment criteria could look something like this:

• Cash-on-cash return of greater than ten percent (>10%);
• Budget/acquisition price of $300,000 or less;
• Repair and renovation costs of $50,000 or less;
• Property Size: at least two (2) units; and
• Gross Monthly Rent: at least 1.1 times the total all-in cost of the property and renovation.

Also, keep in mind that your criteria may be different if you’re using your first property as your primary residence.

Finally, most experienced real estate investors have two (2) separate sets of investment criteria:

1. A general set of criteria that they share with real estate agents, wholesalers, and other investors. These criteria could include things like geography or target location, size and price, and property type. Having these “public criteria” will help people know what you’re looking for and will increase the chances that people will bring you deals to buy.
2. A detailed set of criteria used for internal review and underwriting of the deal. These “private criteria” could include things like minimum monthly income, monthly cash flow targets, minimum or maximum property values or purchase prices, internal rate of return targets, among countless others.

Finally, it’s okay to incorporate other aspects of your personal finances into your investment criteria. For example, setting an upper limit on property value, relative to your net worth, or limiting your monthly mortgage expense so as to still leave room for you to cover the payments on your student loans.

Whatever investment criteria you set, make sure that they account for all aspects of your personal financial situation, that they are moving you closer to your goals, and of course, make sure you stick to them!

Conclusion

Congratulations on making it this far!

If you follow these steps, you’ll be making progress toward your real estate goals in no time!