How To Start Investing In Real Estate


Millennials are starting to invest in real estate in large numbers. Individuals aged 36 years and younger accounted for the largest group of the real estate buyers over the last four years, according to the National Association of Realtors. It’s no doubt that this age group is now realizing the power that real estate investments has to make a lot of money.

Proper financial management
It’s important to realize the burden that loans have. Right now set a plan to manage your finances appropriately. Once you can stop accumulating additional credit card debt, car loans, etc., you can take a plan of action to start paying down debt as soon as possible. The less debt you have, the more real estate you can purchase.

Start now by putting aside a small portion of each pay check. Depending upon the size of your salary, it may be as much as 40% or as a little as 20%. However, if you get into the habit of setting aside this amount of cash each week, then you will be able to purchase a home very soon.

Make your first real estate purchase
There is a tremendous amount of information about how to invest in real estate. While there are certainly some good information, don’t fall for courses or classes that cost thousands of dollars. Seek out a reputable book or blog and start learning as much as possible. I recommend The ABCs of Real Estate Investing by Ken Mcelroy as a first book!

The first real estate purchase you make should be the home you live in. Stop paying rent, living with your parents, or living with a roommate and get out on your own. Look for a modest house in a decent neighborhood that could use a little work. Plan on putting down 5-20% depending on the loan you can qualify for. FHA Loans are great way to place a small down payment for first time buyers.

Start accumulating more houses

Once you made your first purchase, now you can start saving and looking for a second rental home. Make sure you research the going rental prices and look for a deal in a good neighborhood. Houses that can be a small “project” which needs work that you can do yourself are great investments.

Before buying a rental home make sure your mortgage payments, taxes, and insurances are less than your potential rental income would be. You can talk to a realtor who can give you an idea of what the going rental rate would be in your local real estate market. Look for deals that could produce an extra $300-400 income per month that you can set aside in case of future repairs from the rental after all expenses.

Pay down your debt as soon as possible

It’s important to have as little debt as possible when investing in real estate. Banks and lending institutions look at your debt to income ration to determine whether you can qualify for a traditional mortgage. If you can’t qualify for traditional mortgage, then there are alternative financing options available.

One investor I know purchases a home and works to pay it off as soon as possible. Once he fully pays the off house, he will purchase a second home and work to pay off the entire mortgage. What is unique about this model is that once the first rental home is owned free and clear, then the earned income from rent is applied towards the next mortgage for the next home. After a while,  you can easily acquire homes quite rapidly and grow your real estate portfolio.

Join The Discussion

Compare listings