How to Become a Real Estate Investor: 15 Essential Skills

Real estate investment is a blend of economics, creativity, home improvement, marketing, and design. It offers a lucrative career path with the potential for financial freedom. Investors in this field buy residential, commercial, and industrial properties to generate rental income.  

Moreover, real estate investment plays a crucial role in shaping communities, cities, and economies and has grown in popularity to generate passive income. Although rewarding, real estate investing can be challenging, requiring extensive knowledge, tools, and strategies. This blog is a guide to becoming a successful investor. 

What is a Real Estate Investor?  

A real estate investor is someone who acquires homes, land, or other properties to make a profit, whether from rental income, property appreciation, or both. This person can be an entrepreneur, skilled tradesperson, or professional investor, providing the necessary capital for ownership, group ownership, or group management of real estate. 

Depending on the skill set, investment goals, and financing options, real estate investors can choose the type of property to invest in. They can manage their properties on their own or opt for passive management through a property management company or real estate investment trust (REIT).  

What Does a Real Estate Investor Do?  

Real estate investors utilize their funds to turn home buying into a profitable venture. This can involve individual home ownership and sales or working within groups to achieve capital gains. Here is a list of various real estate investment methods commonly pursued: 

1. Flipping Homes: Flipping involves purchasing a home that needs structural improvements, making those upgrades quickly, and then reselling the property for a profit. 
2. Renting Homes: Some investors buy one or more rental properties and find tenants to generate regular income from rent. 
3. Investing in Established REIGs: A Real Estate Investment Group (REIG) operates similarly to a mutual fund. Investors contribute funds and earn returns without managing the investments, which are handled by professionals. 
4. Investing in Established REITs: A Real Estate Investment Trust (REIT) allows investors to buy shares, much like investing in a company through the stock market, and earn returns from real estate investments managed by the trust. 
5. Real Estate Crowdfunding: This involves an online community where real estate investors and developers pool their resources to invest in commercial or residential properties. 

How to Become a Successful Real Estate Investor: 15 Real Estate Skills  

Anyone can succeed in real estate investing with some fundamental skills and knowledge. While it might seem challenging, real estate investing can get pretty easy if you have the following skills:  

1. Familiarity with Real Estate Terminology 

In real estate, familiarity with industry-specific terminology is crucial for aspiring investors. Here are some key terms to know: 

1. Due Diligence: The research process involving the reviewing of documents, estimation of operating expenses, and evaluation of risks associated with a property. It is essential for making informed investment decisions. 
2. HOA (Home Owners Association): An organization that oversees the appearance and maintenance of neighborhoods and condominiums. Investment properties in HOA communities are subject to specific rules, which can affect rental practices and renovations. These rules may also need to be included in rental agreements. 
3. Turnkey Property: A property that is move-in ready, requiring no additional work before occupancy. 
4. Inspection Contingency: A contract clause that lets buyers get a home inspected before completing the purchase. The price can be renegotiated based on the inspection results. 

2. Understanding Cash Flow 

Understanding positive cash flow, and the expenditures that can affect it, is the core of real estate investment calculations. Positive cash flow means your income from the property is more than your expenses. These expenses consist of maintenance, insurance, property tax, long vacancies, HOA fees, mortgage, etc. 

As a real estate investor, it is also good to know concepts such as cap rates, cash-on-cash return, and price-to-rent ratios. 

3. Knowing The Market 

One of the essential real estate skills, acquiring knowledge about your choice of geographic location, and then further studying the residential vs. commercial properties in that region is of utmost importance. You also need to stay ahead of current real estate market trends, mortgage rates, infrastructural developments, rental rates, and future property developments.  

4. Understanding Legalities 

Another must-have skill is the ability to comprehend the various laws that govern the housing market. Rent Control Laws, the Fair Housing Act, individual state Landlord-Tenant Laws, disclosure laws, laws about abandoned tenant properties, and eviction laws are just a few of the many legalities that a real estate investor needs to know about.   

5. Developing A Niche 

Rather than focusing on ‘how to become a property investor’, experienced investors in the real estate market try to create a niche right from their first investment. They focus on one specific area, take time to study and understand it, and then gain the depth of knowledge vital to becoming successful in that area. Examples of niches could be high-end residential, vacation homes, low-income multi-family housing, single-family rental housing, retail spaces, or office spaces.   

6. Communication 

So much of this industry relies on communicating with a wide range of professionals, for example agents, residents, property managers, bankers, lawyers, plumbers, handymen, and a lot more. Developing soft skills like effective verbal and written communication, active listening, negotiation, and tactfulness are all critical to the success of real estate investing. 

7. Patience 

Real estate investors are facing daily pressures – right from the pressure to buy a property at a certain price immediately or regret it later, to the pressure of renting out the property as soon as possible for the income to start flowing. However, you need to understand that real estate deals take time. Also, it might take years to develop the investment portfolio you want. Having patience is an important and underrated skill one must possess in the world of real estate.   

8. Delegation Of Work 

Successful real estate investors know that embracing a professional’s expertise is worth the additional costs. Whether it’s a lawyer, mentor, insurance advisor, property inspector or an organization having excellent property management skills, real estate investors who have been in the business for a long time often attribute their success to such specialists. Delegating work and building a support system along the way is one of the lesser-known real estate skills.    

9. Understanding Customers 

Investing in real estate does not stop at just buying properties and renting them. It requires understanding customer needs, demands, and behavior. For example, if you’re trying to appeal to vacationers, you need to know what they are looking for in a property. Maybe proximity to the city center or a tourist attraction. Maybe a well-appointed property with facilities like a coffee machine and a washing machine. Similarly, single-family home residents will be considering the crime rate in the area. Knowing the prospective customer’s requirements and catering to them can help you win brownie points. 

10. Set Your Goals and Strategy 

Before you start investing, clarify your financial goals and the investment strategy that will help you achieve them. Are you aiming to generate passive income, build long-term wealth, or both? 

Think about your risk tolerance, time horizon, and the capital you are willing to invest in. Your strategy might include buying and holding rental properties, flipping houses, or investing in commercial real estate or REITs. 

11. Leverage Technology and Tools 

In today’s digital age, various technology tools and platforms can help elevate and simplify your real estate investing experience. By exploring property websites, you can make well-informed decisions. Leverage data analytics tools to optimize your investments and use property management software to manage properties with greater efficiency. Embracing technology not only saves you time and reduces costs, but also helps you stay competitive in the market. 

12. Secure Financing 

Consider your financing options for investment properties: Explore cash, conventional loans, or creative alternatives like seller financing, private loans, or hard money loans. 

Build a relationship with a mortgage broker or lender who aligns with your investment goals. Their expertise can help you discover optimal financing solutions tailored to your needs. 

 13. Make Offers and Close Deals 

Once you’ve found the right property, take proactive steps to secure it. Collaborate closely with your real estate agent to negotiate favorable terms and present a strong offer. Conduct thorough due diligence, which involves a comprehensive property inspection, title search, and detailed financial analysis. Upon confirming everything that aligns with your expectations, proceed to finalize the purchase and confidently assume ownership of your valuable investment property. 

14. Social Media Presence 

Investing in real estate is widely sought after, so being proactive is key. Maintaining a robust social media presence enables you to connect with other investors, find investment opportunities swiftly, stay informed about industry news, easily rent out your properties, and sell them when the time is right. 

15. Monitor Performance & Adjust Your Strategy 

Continuously evaluate the performance of your investment properties and adapt your strategy accordingly. Assess cash flow, property appreciation, and overall return on investment (ROI) to align with your investment objectives. 

Stay informed about market trends and adjust your approach to capitalize on emerging opportunities and manage risks effectively. Real estate investing is always changing, so it’s important to adjust your strategy to succeed over the long term. 

Invest in the Right Property with BFPM 

To help you decide whether purchasing a particular property would be a practical investment or not, speak to our Beach Front Property Management professionals to get an expert opinion. We possess the property management skills to help you grow your investment portfolio.  

Feel free to schedule a 15-minute consultation call with us.