Starting off blind when you begin to invest in real estate can be one of the worse choices possible. While most everyone will agree that real estate is a great way to grow your wealth and eventually retire, you still need to go about it in a calculated or deliberate way. Here are three popular ways to invest in real estate.

1. Purchase & Hold – This type of real estate investing is fairly simple and used in a good market. You acquire properties at the best deal possible and then hold them for a fixed number of years to resell after they’re appreciated. This is a good long term investment approach.
2. Flip – This type is considered a short term investment and the goal is to buy, fix up the property, and then sell it as quickly as possible. Typical hold times are 30-90 days.
3. Rentals – This is a great combination of the first two investment types. In this case you purchase properties, often multi-family ones, repair them as needed and rent them out to local tenants. In this case you will get a bit of income from the rent every month, but you also get to sell the properties in the future and take the appreciation at that time.

The type of investment style you choose will have to match your short and long term income goals. Most investors don’t look at these at think “what is the best investment?”. Instead they invest in all three to give them a good spread of real estate investments. Most big investors even venture into the commercial sector. Below are some basic investing tips that will help even the most seasoned investors.

General Investment Tips

1. How much of a return do you want? Most people will throw out a percentage based number, typically in the 10-15% range. It’s important to set this early on and stick with it. If you want to get at least an 10% return on any investment you do and you see a good investment for 8%, pass on it.
2. Budgeting – After your return amount, this is the second best investment tip I can give you. Set a budget that is comfortable for you and that you can afford to lose in a worst case scenario. That way your investments won’t take over your life and be to stressful. Once you’ve set your budget, stick with it in the same way you did with your return percentage.
3. Get a successful real estate agent. You can purchase properties without a real estate agent and some investors have done well this way, but real estate agents have a lot of connections that even some of the best investors don’t have. They can get inside lines on upcoming deals and they also have access to a lot of historical sales data that is crucial when deciding on how much you can sell your investments for.
4. Be honest – Even the best real estate agents won’t be able to help you unless you are honest with what you expect from them and from what you expect from your investments, think of them as a partner you don’t have to share your profits with.
5. Inspections –  This investing tip is more for your first few homes until you can get a feel for homes, their value, and the cost of repairs. There is nothing worse than investing your hard earned money into an investment property, only to barely break even after you do all the repairs. Inspections stop any surprises from popping up on you. Inspectors are great at finding hidden problems that even the best agents and investors might miss. Think of your inspector in a similar way as your real estate agent. They’re another integral piece of the puzzle.
6. Insurance – Checking insurance costs on your investment properties is extremely important, especially if you are buying properties to keep and rent out. The cost of insurance goes up a lot as you add units, so a 4 unit will obviously cost a lot more to insure than a single family home. If you insure all your properties with the same agent they’ll be able to give you a decent discount for doing so. Insurance costs also play a big part in your monthly expenses, so make sure you include them in your expenses when considering a property.
7. Taxes – Tax rates very a lot based on location, the current assessed value of the home, and also if you’ll be an owner occupant of not. Your real estate agent will be able to help you figure out a fairly accurate amount so you can continue to keep a good budget.
8. Financing – This isn’t so much one of the investment tips as it’s just something to get lined up as soon as possible. Unless you are a cash buyer you will need to get pre-approved before you can put an offer in on any home. Putting in an offer without a pre-approval letter is not advised and you are wasting both your time and the time of your real estate agent. Your real estate agent can suggest good lenders that you can talk to. Typical types of financing include cash, FHA, and conventional mortgages.
9. Vacancy Rates – This investment tip doesn’t apply to all investments and is geared more towards rental properties again. Most investors and property management companies can’t guarantee that you’ll have tenants in your rental properties 100% of the time. You’ve got tenant turn over and there will also be times when you’ll need 15-30 days to make returns on the rental units. Depending on how aggressive you want to be you can figure anywhere between 80-90% occupancy. That means about 10 percent or approximately 1 month out of every year you’ll have that unit vacant. Make sure you figure that into your yearly rental income.
10. Cash Flow – Plan on having a certain amount of money set aside for random expenses that will come up during the time you own your properties. Whether it’s an expected repair or a time when you suddenly need to replace a water heater or furnace on short notice, it’s very important to have that money set aside and available quickly.

Investment Tips For Rental Properties

While some of the investment tips above got off topic a bit from being general investment tips, the ones listed below are very specific to rental properties.

1. Lease Agreements – I can’t say this enough times. Always have a lease agreement in place with every tenant. The lease agreement is what guarantees both you and the tenant’s rights and it’s what makes sure you get paid rent every month. If you don’t have a lease in place you’ll never get a judge to rule on your side and make the tenant pay rent.
2. Property Management Services – If you have a couple properties that you own and are renting you it probably doesn’t seem like to large of a burden to manage the properties yourself. As you acquire more rental properties or in some cases choose to retire a bit, the everyday tasks of collecting rent, doing general maintenance, and dealing with tenant leases, questions, etc can become overwhelming. You’ll also have to be on call 24 hours a day with an emergency number in case any of the tenants need to call you and notify you of a fire or broken water pipes. A property manager can take care of all of this for a very small fee, usually in the 8-10% of rent range. So if you have a property that brings in around $2800 dollars a month, they would take $280 dollars to manage it.
3. Quarterly Walk-Through – Getting inside your rental properties every 3 months is essential to making sure they stay in good condition and also important to help stop small maintenance issues from getting out of hand. Simply write into the lease agreement that you’ll be walking through the house every 3 months and you’re covered.

Don’t think of this as a comprehensive list of investment property tips, but instead think about it as tips to get you started. Everyone in the real estate industry will have their own set of investing tips that they’re usually more than happy to share. Investors like to talk to other investors and help each other out. If I could only give you one investment tip to live by though it would be to take your time and don’t get sucked into making a snap decision. You’ll regret it later. If a deal looks or sounds way too good to be true then there is a really good chance that it is. Look to your real estate agent and other investors for advice and their opinion. You don’t have to follow it, but it’s always good food for thought. The last thought I want to leave you with is something that I see way too many investors get sucked into and that’s greed. I can promise that once you get your first investment going you’ll see another one pop up that you’ll want to buy, but don’t. Getting greedy is the quickest way to go broke. Get a plan in place and follow it through.

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