Most people feel like they can’t start investing because they lack the cash to buy an investment property.  Not true.  As a matter of fact, if you are a homeowner you are already an investor.  The question is whether you are a good investor or a bad one.

Real estate investing starts with taking stock of your current situation.  Understanding that real estate investing is typically a long term investment, you first need to determine if you have the time.  For example, real estate for someone who is sixty years old and about to retire may not be the best unless they have a lot of cash to work with and a market that supports fast turn-around in real estate.  But if you are thirty years old, there is plenty of time to hold your properties to maximize your returns.

If you already own a home, there is a reasonable chance that the home you are living in may make a good investment property and can be used as the first property in your portfolio.  It is easy to convert, you are already aware of the issues with the home, and you can speak well to the type of people who would typically want to live in your area.

If you don’t own a home, then consider buying a home to live in with the intent to convert that home in a pre-defined period of time into an investment property.  Buying homes to live in, then converting then into investment properties, is a great way to build a solid portfolio with a minimum of disruption or stress. 

Comparing Investments
When you decide that you want to invest in real estate, the first thing you need to do is compare real estate as an investment to your other types of investments (stocks, bonds, retirement funds, etc.)  This is critical in understanding whether investing in real estate would even make sense for you.

If real estate is an equal to or higher rate of return than your current investments, you may want to consider taking money out of your current investments and diversifying into real estate.  Diversifying, or owning multiple types of investments, helps lower your risk of losing all of your money.

Buying Your First Property
Whether the first investment property you buy is converting your current home, a house you buy that you will live in and convert, or a property that is being bought solely as an investment, always start conservatively.  The first home is the one you learn on, and the lessons you learn can be painful.  So make sure that you first investment is a lower risk property even if the expected return is not very high.  That way you can learn while minimizing your risk.

Ask Advice
When thinking about buying an investment property, ask advice from people who have done it.  Find out what worked for them and what didn’t.  If you can, try to find someone who has invested in many properties and see if they will act as a mentor to you, helping you by leveraging their experience to keep you out of trouble.

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