6 Tried-and-True Tips for First-Time Real Estate Investors

By Ralph Serrano

We all start somewhere.

For real estate investors, “starting somewhere” generally means buying that first investment property. Unfortunately, for one reason or another, far too many first-time real estate investors end up as one-time real estate investors.

Want to avoid that fate? Follow these six tips for first-time investment property buyers. How many are you following right now?

1. Work With Someone Who Knows What They’re Doing

When in doubt, find a partner.

You’ll hear this advice from veteran investors time and time again — because it’s sound advice. You’re not going to strike gold on your first foray into the market; better to work with a senior partner on your first deal than flail about until you fail.

2. Understand the Difference Between ROI and ROE

One letter makes a world of difference. 

 

“Return on investment (ROI) is your return on the cash you actually put up to seal the deal; return on equity (ROE) is your return on the actual equity in your investment property.” — Ralph Serrano 

 

If you buy in cash, these numbers won’t be too far apart to start (though that’ll change once you begin making improvements). If you’re leveraged, it’s a different ballgame from the get-go.

3. Think Twice About Borrowing From Friends and Family

Do you really want to be beholden to people you see socially — or, worse, at Thanksgiving? Perhaps your answer is “yes,” in all seriousness, but it’s more likely to be “no.” Think carefully.

4. Don’t Bite Off More Than You Can Chew

If it seems like too much work to take on yourself, it probably is. Have patience and you’ll encounter lower-key (and perhaps even turnkey) opportunities. Save the high-risk, high-reward projects for later, when you’ve got your real estate investing sea legs.

5. Choose Your Market Carefully (And Know It Well)

Chances are good that you already know which market you want to play in. It’s probably the market you know best.

That’s great. Stick to it for as long as it can hold you. There’s more opportunity here than you might realize.

More importantly, the threats beyond your market — the known unknowns and unknown unknowns — may also be more numerous than you realize. As you scale, you’ll have the luxury of focusing on new markets. Until then, stick to what you know.

6. Tread Carefully, But Don’t Be Shy

They say that fortune favors the bold, but that isn’t quite right. The bold very often make ill-advised moves that do more harm than good.

Here’s an amendment: Fortune favors the assertive. Assertive real estate investors know how to pick their spots — and how to pounce once they’ve sized up a can’t-miss opportunity. 

Perhaps assertiveness can’t be taught. But it’s fair to bet that, with enough experience, you’ll earn it. 

Here’s to those first-time real estate investors bent on becoming many-time real-estate investors — and the assertiveness to get them there. It won’t be easy, but it is possible.

 

Ralph Serrano of Miami-based Safe Harbor Equity, is the founder and managing partner.