Breaking into real estate investing can seem like a monumental challenge if you have no prior experience. But learning how to become successful in real estate starts with meeting that challenge head-on and taking the first step. The good news is this is completely doable–many have tried before and succeeded.
At Defy Mortgage, we provide comprehensive solutions that streamline the mortgage process. Whether you’re an entrepreneur looking to diversify, a self-employed individual seeking an affordable home loan, or a real estate investor just starting out, we simplify the process of managing your mortgage, such as DSCR, bank statements, and foreign national loans.
In this guide, we’ll help you establish your baseline and point you to vital resources to kickstart your real estate journey. We’ll also explore beginner-friendly investment strategies and financial options, as well as key focus areas for real estate education, to help you hit the ground running.
Let’s get to it!
Start with Real Estate Education
If you’re wondering how to get into real estate with no experience, self-education should be your first step. Properly understanding real estate concepts and conventions can allow you to make informed decisions in the market, navigate transactions more effectively, and maximize your investment potential. Focus on reputable sources such as:
- Online Courses and Certifications: Platforms like Udemy, Coursera, and LinkedIn Learning offer structured online classes tailored for beginners. You can find courses that cover everything from market analysis to financing strategies, making them a great option for new investors.
- Real Estate Terminology: Understanding key terms like ROI, cash flow, appreciation, and equity is crucial for making informed investment decisions. Try to apply new terms that you’ve learned in real-life scenarios to confirm that you have the correct understanding.
- Online Resources: Real estate industry blogs, such as Defy’s blog, are a great place to start. YouTube channels and podcasts relevant to your topic of interest can also offer valuable insights.
- Real Estate Laws: You should build a basic understanding of federal regulations for real estate investing as well as state regulations for where you want to invest. This is especially important if you plan on pursuing creative financing or other methods where regulations can be more ambiguous than traditional financing methods.
- Books & Educational Resources: For beginners, reading books on building personal wealth or investing in real estate can be a great way to learn from experts. While there are many great options out there, we recommend industry classics such as The Millionaire Real Estate Investor by Gary Keller or Financial Freedom with Real Estate Investing by Michael Blank.
- Mentorship and Coaching: Consider joining local real estate investment groups and connect with other professionals experienced in real estate investing. Learning directly from seasoned investors accelerates growth and can help you save a lot of time consulting elsewhere.
Define Your Real Estate Goals and Strategy
Success in real estate depends on setting clear, actionable goals. Before you begin, choose a path that aligns with your skills, budget, and long-term objectives. Here are some different approaches that you can consider:
Investment Strategies
There are many different investment strategies, such as renting out residential or commercial real estate to house flipping or wholesaling. Each strategy has its own requirements, risk profiles, and investment horizons.
To find out which investment strategy is right for you, you can start by understanding the market in which you’d like to invest. If office space is more of a premium in your area than residential space, it may be better to focus on commercial properties. If you want to invest in a particularly touristy area, a short-term rental (STR) might offer better returns.
Short-Term vs. Long-Term Goals
Are you looking for long-term passive income or short-term profits? For example, a property that appreciates slowly can still generate stable monthly rental income if you can maintain high occupancy.
Short-term investments, on the other hand, allow you to maximize potential earnings in high-demand markets. Markets with fast turnover can give you much more income than long-term investments in the same amount of time, especially when you utilize fix-and-flip loans, which base their terms on the after-repair value (ARV), or the projected sale value of the home once renovated. However, they also carry higher risks due to potential market shifts.
Risk Tolerance and Budgeting
Make sure you fully understand how much risk you’re taking with the property you’re investing in. Knowing your risk tolerance helps you decide whether to pursue stable rental income, value-add properties, or high-risk flips. This also determines your budget strategy and ensures that you have enough cash flow for maintenance, vacancies, and other unexpected costs.
Start Small to Minimize Risks
If you are new to the real estate industry, taking small steps can reduce financial risks while providing practical experience. Here are some smaller-scale investment strategies you can use to get the hang of real estate investing:
Single-Family Homes
Single-family homes are often much more straightforward to manage than multi-family units. This is the case even for larger single-family homes, as there is only one unit to maintain and keep track of. Multi-family property usually has its own set of maintenance needs, utility setups, and potential tenant issues.
House Hacking
A great way to simplify property management is by “house hacking,” or using free space in your own residence to generate income. Essentially, you can purchase a multi-family property, live in one of the units, and rent out the others. FHA loans are a convenient way to finance this kind of investment. Down payments for these loans can be lower as long as the property meets FHA’s occupancy requirements.
Other forms of house hacking include renting out yard space and installing accessory dwelling units (ADUs). While the right option for you depends on your specific situation, renting out your primary residence can generally lead to a more straightforward management process and require less starting capital.
Partner with Other Investors
If this is your first time investing in real estate, consider partnering with other investors who may be more experienced. In a joint venture, you divide up the costs and responsibilities and negotiate the specific terms of your agreement. This allows you to ease into the day-to-day of a real estate investor without taking on 100% of the risk.
While this is a great way to lower your risk as a first-time investor, note that it probably also means that you will share the profit. Be sure to partner with those you trust and examine the terms of the joint venture in detail. Watch out for terms that may seem too good to be true.
Build a Portfolio of Investments
Relying solely on a single property’s appreciation means that your profitability is subject to unpredictable market fluctuations in that area. If property values decline or stagnate, you may struggle to sell at a profit.
As you become more seasoned as an investor, consider the kind of portfolio that would allow you to maintain a net positive cash flow that persists through market downturns. For example, it’s a good idea to have properties in markets with healthy rental demand. While this can’t be achieved overnight, you can approach each purchase strategically to set yourself up over time. Having properties in different neighborhoods also allows you to spread risks if a certain area becomes less attractive due to unforeseen circumstances.
DSCR loans are perfect for this “snowballing” strategy, as they allow you to qualify for loans using a property’s income potential, generally disregarding your debt-to-income (DTI) ratio while imposing no hard limits on how many properties you can have active at a time.
Build a Strong Real Estate Network
Networking is an essential tool for real estate investors at any stage, but especially new investors. Surrounding yourself with other experienced investors can give you key insights into your target markets, notify you of investment opportunities, and perhaps most importantly, provide invaluable mentorship on the investments you want to undertake.
Here’s how you can build a thriving real estate network around yourself:
Attend Real Estate Meetups & Conferences
Real estate events can put you in direct contact with seasoned investors, agents, and lenders. Look up meetup schedules for your local real estate investor (REI) group and for conferences like the National Real Estate Investors Association (NREIA). Online forums like BiggerPockets may also have meetups in your area.
In these meetups, you can exchange ideas with like-minded individuals, learn market trends, and build relationships with people who’ve already navigated the challenges you’re facing.
Engage with Industry Professionals
Besides finding promising investments, you should build a solid team that can help you execute your strategy. This doesn’t have to be people that you employ–you can build strong trust and working relationships with real estate agents, contractors, and property managers over time. They will help with operating your investments and solving issues.
Attending open houses is a great way to network with experienced real estate agents, who can give you current insights on various markets and submarkets. Finding a good local broker can streamline deal sourcing and real estate marketing efforts as well, greatly reducing the timeline of finding buyers or tenants.
As you and your team continue to work together, you’ll build a smoother and more efficient process that can scale with your growing real estate portfolio.
Grow an Online Presence
Creating a strong network isn’t limited to in-person meetings—online communities can also provide valuable connections. Platforms like LinkedIn or Facebook groups allow you to share insights, ask for advice, and connect with other investors. The more active you are in these spaces, the more opportunities you can uncover.
Explore Different Financing Options
Even if you have saved enough for a down payment on your desired investment, it’s still worth exploring other ways you may be able to finance your purchase to find the best deal for your financial profile. Here are some common alternatives on the market:
FHA Loans
While conventional loans can be a solid option for borrowers with high credit scores and low debt-to-income ratios (DTIs), FHA loans are designed to help borrowers purchase a primary residence, offering down payments as low as 3.5% for borrowers with a FICO score of 580 (or 10% for scores between 500 and 579). They are an excellent option for first-time homebuyers, especially those with lower credit scores.
While FHA loans cannot be used to purchase investment properties, borrowers can rent out their FHA-financed home after living in it for at least one year. This allows homeowners to eventually transition the property into a rental while still complying with FHA rules. Always consult with a mortgage professional to ensure you meet all FHA requirements and understand your options.
Creative Financing
Creative financing is a broad term for unconventional financing techniques designed to help investors work around the strict underwriting and other requirements of more mainstream mortgages. This can range from non-QM loans like DSCR loans to peer-to-peer agreements like seller financing and private money lenders.
Home Equity Loans
If you live in or own a home that has built up significant equity, you can withdraw that equity in the form of a home equity loan, home equity line of credit (HELOC) or cash out refinance. If your property has appreciated enough, depending on how much equity you draw, you can potentially fund an entire investment property purchase without having to make any upfront payments out of pocket. Be sure to include closing costs in your calculations.
Hard Money Loans
If your preferred strategy is house flipping, you can make use of a hard money loan or bridge loan to purchase the property and fix it up. Hard money loans don’t have strict credit and underwriting requirements or extensive background checks, making them relatively easy to be approved for. However, this relies on being able to quickly offload the property, as hard money loans typically have shorter terms of 1.5 to 3 years.
At Defy, we offer fix and flip loans and construction loans as an alternative to hard money loans, with slightly more requirements but more favorable terms, including higher LTVs and lower interest rates.
You can also refinance from a hard money or bridge loan into a long-term mortgage, such as a conventional loan or DSCR loan. This is central to the Buy, Renovate, Rent, Refinance, Repeat (BRRRR) strategy, where investors use the easy approval of hard money loans for quick acquisitions, refinance into a more sustainable loan once rental income has stabilized, and move on to their next investment, facilitating rapid growth.
Take Action and Learn from Mistakes
Many beginners suffer from analysis paralysis, delaying their first move in fear of making the wrong choice. This is understandable because real estate is a significant investment. But success in real estate comes from hands-on experience—taking action, making adjustments, and improving over time.
Make Your First Investment
The most important step is the first one, but it doesn’t have to be daunting. As long as you start small, mistakes will cost you much less, but every second you spend working hands-on helps you gain crucial experience. You can gradually scale up as you learn the ropes. The key is to get started—every deal you complete builds confidence and knowledge, setting the foundation for bigger moves in the future.
Learn from Mistakes
There’s always something that can go wrong, but by understanding why they went wrong, you can make your mistakes work for you. Journaling everything you can gives you as much data as possible to analyze the factors that contributed to your mistakes and develop a system to make sure they never happen again.
A tenant screening mistake might teach you what you overlook during your screening process, while an unexpected repair could highlight weaknesses in your investment property’s utility systems or structural integrity. Experienced investors improve by recognizing patterns, adjusting strategies, and applying what they’ve learned to future deals.
Mitigate Risks
Smart investing isn’t about avoiding risk—it’s about managing it. Due diligence is crucial: research property values, analyze local real estate markets, and consult professionals when necessary. Legal or financial advisors can catch details you might overlook, and real estate mentors can provide guidance based on their own experiences.
Use Technology and Tools to Simplify the Process
Once you’ve read through most of the primers and have established a good grasp of real estate investing, you should have a working idea of how to use the following tech tools to make investments easier to find and manage:
- Property Research: You may already know about Zillow, Redfin, and Realtor.com. These are a good place to start your property research. Zillow and Redfin provide valuation tools and trend analyses, allowing precise evaluations of investment opportunities. Realtor.com can connect users with more professionals. All three platforms provide real-time listings, market data, and property details, allowing you to cross-check your findings.
- Deal Analysis: A thorough deal analysis can help you evaluate potential profitability and mitigate financial risks before committing to a property. Specialized tools can assess strategies for rentals, fix-and-flips, and BRRRR, backing up your decisions with data. DealCheck can also help by providing cash flow projections and offering calculations of a property’s maximum purchase price.
- Property Management: Managing and scaling investments efficiently requires the right software. Buildium centralizes lease tracking, maintenance management, and accounting, cutting down on administrative work. Rentec Direct simplifies rent collection and tenant communication, making daily operations smoother. AppFolio streamlines everything with digital rent collection, screening tools, and financial reporting, keeping property management seamless.
How to Become Successful in Real Estate FAQ
What’s the best type of real estate investment for beginners?
Single-family rentals and house hacking are beginner-friendly options that require minimal capital. These strategies allow new investors to gain experience with property management while keeping financial risk low.
How much money do I need to start in real estate?
Depending on financing options, you can start with as little as 3.5% down using an FHA loan. Certain strategies, such as creative financing or home equity financing, can involve little to no upfront capital. Mortgages with more standard structures like DSCR loans usually require between 20-25% down, depending on the lender’s LTV limit (At Defy, it’s as low as 15%, meaning borrowers can make a down payment as low as 15%).
Is real estate investing risky for someone with no experience?
Like any investment, real estate carries risks, but thorough research and mentorship can minimize potential losses. Partnering with experienced investors or hiring property managers can further reduce common beginner mistakes.
Do I need a real estate license to invest in real estate?
You do not need a real estate license to purchase a real estate investment. However, renting out properties can involve applying for a business license, as well as permits, and meeting various other requirements imposed by your local government. That said, it can be beneficial for your real estate business to get licensed, as it can give you access to the Multiple Listing Service (MLS) and other resources exclusive to licensed sales agents and brokers. As an investor, this can potentially save you thousands of dollars in commission fees since you’d be your own agent.
To get your license, you typically have to attend a real estate school for 60 to 90 hours, depending on your state’s requirements, and pass the real estate licensing exam. Real estate licenses are state-specific, so make sure to look up your state’s real estate commission or regulatory agency to find out if there are certain requirements you need to meet.
Can I start real estate investing part-time while working full-time?
Yes, many investors start their real estate careers part-time through house hacking, rental properties, or wholesaling. With the right property management tools and team and a clear strategy, it’s possible to build passive income from real estate while maintaining a full-time job.
How long does it take to see returns from real estate investments?
The timeline for returns varies depending on the investment strategy. Rental properties can generate steady cash flow immediately after securing tenants, while house flipping may take months to yield a profit. Long-term appreciation strategies, such as buy-and-hold investing, typically take several years to realize significant gains.
Key Takeaway
Although it adds to the challenge, lack of experience is no barrier to entering the world of real estate investing. With the number of resources available online now, anyone with the time and dedication can become a savvy investor.
With a comprehensive education on real estate concepts as your foundation, you can take advantage of online resources, mentorship, and a thriving network to ensure that every decision is made with the utmost consideration within a robust support framework. By starting small and using beginner-friendly investment approaches, you can build confidence and gather momentum for more lucrative undertakings.
Whatever your investment goals, Defy is here to make your experience streamlined and stress-free. Book a free consultation with us today, and let’s talk strategy!
