{"id":10947,"date":"2019-06-28T14:13:39","date_gmt":"2019-06-28T21:13:39","guid":{"rendered":"https:\/\/www.homelight.com\/blog\/?p=10947"},"modified":"2026-04-06T09:19:52","modified_gmt":"2026-04-06T16:19:52","slug":"real-estate-investing-for-beginners","status":"publish","type":"post","link":"https:\/\/www.homelight.com\/blog\/real-estate-investing-for-beginners\/","title":{"rendered":"Real Estate Investing for Beginners: 5 Questions to Ask Before You Get Started"},"content":{"rendered":"

Depending on the level of involvement you desire, investing in real estate can be as demanding as managing multiple properties and tenants or as simple as taking 10 minutes to create an online portfolio<\/a> on a crowdfunding site.<\/p>\n

When the market\u2019s up, many aspiring investors may try their hand at making a buck, but the reality is that it\u2019s a business with a high risk of failure<\/a>. An appreciating asset<\/a>, people often think real estate is a safe bet; however, it\u2019s also illiquid and requires a longer time frame<\/a> to see results than stocks, for example. So we talked to an array of real estate experts to investigate what kind of person is the right fit for real estate investing, and what kind of investing is best for beginners.<\/p>\n

According to their experience, it\u2019s not only about ranking in returns\u2014the real estate investor is a specific kind of spender. Before you tie up your finances in property to rent or flip, here are five essential questions to ask.<\/p>\n\n\n\n\n\n

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Investing in Real Estate? Consult With a Top Agent<\/h3>\n

Hire an investor-friendly real estate agent who can help you get access to off-market properties at a discount and assess potential rental income based on market trends. HomeLight can connect you with investment property specialists at no cost.<\/p>\n \n

\n Get Started<\/a>\n <\/div>\n <\/div>\n<\/div>\n\n\n

1. Are you the right personality fit?<\/h2>\n

You can read all the blogs on the ins and outs of real estate investing that the internet has to offer, but if your personality isn\u2019t a good fit for this type of investment you\u2019ll still be facing an uphill battle.<\/p>\n

\u201cA common misconception is that you have to know how to do all the work yourself. That you have to be handy or that you have to be a ‘jack of all trades’ type, which is not true at all,\u201d explains real estate agent and investor Jeremy Rynders<\/a>. Based in Milwaukee, Rynders is an experienced flipper, as well as rental property owner.<\/p>\n

Rather, whether going into flipping or rental investment, Rynders says the appetite for risk is necessary. <\/b><\/p>\n

When Rynders reflects on his success in real estate investing, it\u2019s often because he was willing to purchase a property when no one else was: \u201cI didn’t have a special inside deal on them, they were on the market. It’s just the market was worse then, so people weren’t as willing to buy them.\u201d<\/p>\n

If the thought of going door to door to find leads for your next flip, or confronting a tenant about a late rent check makes you nervous, then hands-on real estate might not be for you.<\/p>\n

\u201cThe hardest part about flipping a house right now is finding the house to buy,\u201d Rynders explains. You\u2019ve got to be willing and good at scouring court records, networking with agents and developers, or even knocking on doors in areas for lead generation. That, and a real estate agent<\/a> knowledgeable in flips or rentals, is your key to that initial property hunt.<\/p>\n

While you\u2019re at it, consider what personality skills might help your edge out the competition in your area, advises full-time flipper, Uriah Dortch<\/a>. You might be investing in real estate as a side hustle, but you\u2019ll \u201cneed a competitive advantage to beat out someone like us that does this full time, has a team of people and lives and breathes this lifestyle.\u201d<\/p>\n

That might mean you thrive when networking, or already have a Rolodex full of contacts. Perhaps you love being part of the action, and your people skills make confrontations around late rent or property complaints no problem.<\/p>\n

If people describe you as a risk-taking people person, flipping properties or investing in rentals might be a fit for you. But, if you see yourself more on the sidelines in other aspects of life, you might want to consider more passive real estate investment alternatives (more on that below).<\/p>\n

2. How much initial capital do you have to work with?<\/b><\/h2>\n

Real estate investing comes in all shapes, sizes, and opportunities\u2014especially when it comes to the depth of your pocket book. The type of investment route you decide to go down will not only depend on having the right personality, but also how much money you have to work with upfront.<\/p>\n

Here\u2019s how much you can expect to spend on these common types of real estate investments, from most expensive to least expensive:<\/p>\n

House flipping<\/h4>\n

Purchasing a house, renovating it, and selling it typically comes with the highest price tag.<\/p>\n

In the Milwaukee market, Rynders reasons you\u2019d need between $120,000 and $200,000 to successfully flip a home. That means purchasing a home for between $80,000 to $120,000, then investing $50,000 to $80,000\u2014assuming you\u2019re doing this all in cash<\/a>.<\/p>\n

The biggest barrier to entry for many when it comes to flipping is the 20% to 25% down payment on the property. Typically, you\u2019ll need a higher down payment for an investment property<\/a> than buying a property for yourself\u2014you\u2019re limited to financing the purchase of the property through conventional mortgage loans, or cash.<\/p>\n

The rule of thumb when investing in a flip is researching the potential ARV (after-repair value) of the property in your market, then working backwards<\/a>: cut that cost by 75%, then subtract the estimated cost of repairs to determine how much you should pay for a home you want to flip.<\/p>\n

Rental properties<\/h4>\n

If you\u2019re purchasing a rental property, you\u2019ll still need the 20% to 25% down payment, and depending on the condition of your property, you might not need to allocate as much capital towards renovations.<\/p>\n

When you\u2019re factoring in the expenses around a rental property, it\u2019s smart to keep the 1% Rule<\/a> in mind. The 1% Rule means that if your property can rent for at least 1% of the cost it took to acquire it, then it\u2019s a solid investment. Keep in mind acquisition costs isn\u2019t just the market cost of the home, but remodeling or any other expenses you\u2019d have to take on before bringing in tenants.<\/p>\n

While a rental might not be as capital intensive upfront as a flip, you do have to consider the cost of monthly maintenance on the property. Remember, you\u2019re not flipping and selling, you\u2019re updating and occupying. The profits you collect in rent will have to factor in the cost of<\/a>:<\/p>\n