The opinions expressed by Entrepreneur members are their own.
Successful people know the value of investments. There are several ways to become very rich in life, but few of them have the same track record as investing in real estate. Real estate investing is one of the best wealth generators in the world. There are probably more millionaires in real estate than in any other business category. So, what is a “real estate investor” and how to become one?
The term “real estate investor” often refers to individuals and businesses who buy, sell and renovate homes. However, you do not need to be a professional realtor to hold a real estate investor title. Anyone in any industry who actively chooses real estate as an investment option is a real estate investor. Some people choose real estate as an alternative to stocks, bonds, and mutual funds, while others prefer add real estate into your existing investment portfolio. The question is often asked: is it available to everyone?
Here are three of the most common misconceptions about investing in real estate.
On the subject: 10 reasons why every entrepreneur should invest in real estate
You must be rich to invest in real estate
When most people think of investing in real estate, they think of mega-rich celebrities and their huge real estate portfolios. Just because you don’t drive a Lamborghini and don’t get paid from a multi-million dollar trust fund doesn’t mean you can’t invest in real estate. There are many ways to start investing that require very little personal outlay.
Traditional wholesaling and joint ventures are just a few methods that require little to no capital. Hard work and dedication is all it takes to become a very successful real estate investor. By using the right methods, you can sell your first property for very little money, and perhaps not even spending a dime.
Do you need a good loan to finance real estate transactions?
If you are applying for a traditional bank loan, you will need an adequate credit score for the approval process. However, there are many other ways to secure funding for your real estate investment. Let’s take a look at two of the most common financing options that require little to no loan approval.
Transactional funding, also known as instant funding
Transactional financing is a short-term loan, which in most cases is borrowed and repaid within 24 hours. This type of funding is common during a double shutdown that occurs back to back. This allows the investor to secure the A to B party in a real estate transaction. Then, once the investment is secured, the investor can sell properties on the B and C sides. Once they have raised the funds from this closure, they will immediately repay the initial loan of the instant fund. In most cases, these loans are secured by the asset being acquired and not by the investor.
Hard money financing
Hard money financing is another popular strategy that real estate investors use to acquire investments. This type of loan is known as bridge loan. This is a short-term loan that allows an investor to purchase property without the lengthy application or approval process required by traditional banks. Hard money loans are asset-based, which means they are not dependent on the creditworthiness of the investor. They are typically used in renovation projects where an investor buys a property at a discount, then remodels the house and resells it at a profit, after which he repays the loan. These loans rarely exceed a 24-month period.
RELATED: 3 Ways Entrepreneurs Can Save on Real Estate Costs
Do you need experience to invest in real estate
The fact that you have never invested in real estate should not stop you from investing. A little research can go a long way. Experience is gained by action. After all, to become an experienced driver, you have to drive. This doesn’t mean you have to get in a sports car and hit the race track. This means you start by driving around your neighborhood, your city, city, highways and eventually interstates, etc. It’s the same with real estate investment. Your first investment should not be a 500-room condominium with a 60-page sale and purchase agreement. It should be an affordable single family home in areas you are familiar with.
There is no doubt that you can start investing with little or no knowledge or experience. However, if you want to speed up your learning curve, you can seek the help of an experienced professional as a mentor. A successful investor can not only teach you what to do, but more importantly, what not to do. Being able to avoid costly rookie mistakes is a huge advantage and increases your chances of success. Many successful business professionals have mentors, and real estate is no exception. Just make sure you do your research to make sure you are seeking advice from a qualified advisor with years of experience in real estate investing.
There is a reason why so many people turn to real estate as a means of making money. Simply put, it works. Don’t be discouraged by false information and myths about what it takes to get started. The only thing stopping you from becoming a real estate investor is yourself. One of the most famous investors in the world, W*rren Buffett, once said:Be confident in your success, even if no one else“. Don’t hesitate, do your research and start your journey.