How to Invest in Real Estate the Smarter Way? (Step-by-step Guide)

Are you thinking of investing in the real estate market? Read our guide on how to invest in real estate the SMARTER way to guarantee success in this industry.

How to Invest in Real Estate the Smarter Way? (Step-by-step Guide)

Real estate is known for its ability to appreciate over time. This makes it a great avenue for investment returns. In today’s dynamic world, people pursue success through hard work or smart choices. While both paths can lead to success, those using the SMARTER approach often have quicker results if executed properly. 

So to ensure that your real estate investments are profitable as an investor, we bring you the SMARTER way of investing to help diversify your real estate portfolio. 

First, let’s discuss what this strategy is exactly.

What Are S.M.A.R.T.E.R Goals?

The SMARTER goals framework is a tool used to pen down goals or objectives that are realistic, achievable, and efficient. SMART goals are specific, measurable, achievable, relevant, and time-bound. 

On the other hand, the newer, SMARTER acronym expands on this framework by incorporating two additional characteristics: evaluate and revise. 

Look at the 

Utilizing the SMARTER structure, you can optimize your chances of success and monitor your progress effectively. This approach also prevents the setting of unattainable or poorly timed objectives. So let’s show you how to use this framework to help you properly invest in real estate.

Investing in Real Estate The S.M.A.R.T.E.R way

Let’s break down your potential real estate investing journey in 7 SMARTER steps.

S: Strategize Your Goals

Before rushing to invest, ask yourself: 

  • Why are you investing?
  • What do you aim to achieve in the long term?

This strategy will guide you every step of the way, from property selection to team building. 

When creating your plan make sure you: 

  • Know Your Investment Motive: Identify what drives you and use that as your long-term inspiration. 
  • Arrange Finances: Establish a strong financial foundation and determine the best borrowing options for your investment strategy.
  • Learn the Market: Knowledge is key so try to explore various resources like podcasts, webinars, books, and boot camps. 
  • Pen SMART Goals: Define specific, measurable, achievable, relevant, and time-bound objectives. These goals will guide your investment journey.
  • Finalize Your Approach: Select investment strategies aligned with your goals, whether it’s focusing on cash flow or appreciation, single-family rentals, or fix-and-flips. This can even determine what type of investment is right for you such as Active vs Passive real estate investment.

M: Conduct Market Research

Choosing the right market can play a big role in your investment strategy, but it can be complex. Explore various investment types and learn how to pinpoint your ideal market effectively.

Considerations when selecting a market:

  • Local vs. Long Distance: Consider the pros and cons of investing locally versus further away from you. Determine which market aligns best with your strategy and budget.
  • Short-Term Rental Analysis: Research potential markets and understand local regulations before investing in short-term rentals. 
  • Assemble Your Team: Assemble a reliable team of professionals to assist with property purchase, renovation, rental, and management.
  • Long-Term Rental Analysis: Identify key factors to consider when evaluating long-term rental markets. 
  • Networking is Key: Make valuable connections within the real estate investing community by attending REI workshops and engaging with agents. 

A: Acquiring The Deal

Real estate investors must understand that success begins with the acquisition process. Once you’re done with the first two steps it’s time to begin the investing process

  • Finding the Deal: Enhance your deal flow with access to top-notch tools for uncovering both on-and-off-market opportunities through professional real estate dealers and groups.
  • Due Diligence and Analysis: with the help of your team, ensure your potential investment makes financial sense. Crunching the numbers will give you a potential answer to whether the deal has the potential to expand.
  • Secure Funding: Discover the right funding option for your deal—whether it’s cash, leverage, or syndication. 
  • Borrow to Invest: Unlock scalability and potential wealth through strategic borrowing. If you have the capital to do so, you can also mortgage your existing assets.

R: Refurnish & Rent 

Approaching the rehab to rent phase you need to be sure that have a set of skilled professionals to handle your day-to-day. This can include:

  • Contractors: They can help monitor material and labor costs closely to stay within your budget and timeline.
  • Project Managers: If you’re investing in areas that are not within arm’s reach, having a skilled project manager can be invaluable as they can oversee the job and ensure everything runs smoothly.
  • Tenant Screening: Conduct thorough screenings and background checks and complete all lease agreements and tenant forms diligently to secure reliable renters.

T: Tracking Your Investments

Tracking your real estate assets is important regardless of whether you’re managing them yourself or working with a property manager. 

Tips for Keeping Track:

  • Property Management: Utilize partnerships with leading platforms for independent property management. Alternatively, you can connect with reputable local property management teams overseeing performance.
  • Investment Maintenance: Monitor your assets consistently with the use of various enterprise tools. 
  • Regular Reporting: Stay informed with regular reports on key metrics such as work orders and market values. These will guide your decisions at every stage of your investment journey.
  • Bookkeeping and Tax Preparation: Maintain accurate records of income, expenses, profit, and loss. 

E: Exit or Expand

Now, that we have come to this stage where you can see your investment in operation, you have the option to expand or exit through exchange, sale, or refinancing, 

Different Exit Strategies:

  • Refinance: Exchange your equity for increased cash flow or cash out through mortgage refinancing. This can help accelerate your timelines and put your equity to work for you effectively.
  • Selling: When selling your property, you can link yourself with qualified agents, wholesalers, or services to help you exchange your asset for cash. Only do this if for properties that no longer align with your goals or to reduce the debt-to-income ratio.
  • 1031 Exchange: Utilize the 1031 exchange strategy to swap one investment property for another similar property and defer capital gains taxes. It’s a valuable tool in real estate investment for optimizing returns.
  • Enlist your property in the market: Alternatively, you can also list your property on online marketplaces to maximize your visibility to potential buyers. 

R: Repeat & Replicate 

To expand your portfolio, it’s essential to replicate successful strategies and learn from setbacks. Here are some steps to follow if you want to do all of the above once again:

  • Stay Focused: Keep your goal as your guiding light. Once you’ve successfully invested in returns, you will learn a lot of things along the way that will help in future investments. 
  • Evaluate and Adapt: Regularly review your progress and make necessary adjustments. Smart investors understand that both success and failure offer valuable lessons for growth.
  • Implement Structured Approaches: As your portfolio grows, consider legal structures like LLCs for asset protection and anonymity. 
  • Keep a Growth Mindset: Whether repeating successful deals or transitioning to new property types, it’s best to keep an open mind. Success may not come all the time but can only be solidified with focus and perseverance.

3 Best Real Estate Markets To Invest

When investing in real estate consider these 3 investments to kick-start your journey

1. Real Estate Investment Trusts (REITs)

REITs provide a low-risk option for investing in real estate without significant capital or risk. Similar to stocks and bonds, REITs involve investing in commercial properties like office buildings, apartments, and shopping malls. These trusts offer high liquidity, allowing investors to buy and sell shares easily through brokerage accounts. 

Public REITs are traded on stock exchanges, while private REITs are available through crowdfunding platforms. REITs offer attractive dividends and provide diversification across properties globally.

2. Short-Term Rental Properties

Investing in rental properties offers various options, including single-family homes, multi-family units, and short-term rentals like Airbnb. Rental properties, when chosen after proper research, can generate substantial profits. They require active management, including property maintenance, rent collection, and tenant management. 

As an investor, you can hire property management companies like RSN Property Group to handle these tasks for a small management fee. Rental properties provide steady income through rental payments, potential equity growth, and tax advantages.

3. House Flipping

House flipping involves purchasing properties below market value, renovating them, and selling them for a profit. While house flipping can be lucrative, it carries inherent risks, such as exceeding renovation budgets and market fluctuations. Discouraged for first-time investors, as house flipping requires great market knowledge

Successful house flipping requires careful property selection, effective renovation management, and accurate market analysis. You should aim to find properties with minimal renovation needs in emerging markets to maximize profits.

Use The Smarter Way To Invest In Real Estate 

While no one can guarantee exact profits in real estate investments, you can ensure the success of your portfolio by making informed and strategic decisions. Following our S.M.A.R.T.E.R goals you can dream of establishing a strong presence in the real estate market. 

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