How to Become a Real Estate Investor

Stocks and bonds are the first options that come to mind when most people think of investing. But there’s another savvy form of investment that may also create wealth for people who’ve opted to give it a try: real estate investment.

“Real estate is everywhere,” says Teo Nicolais, president of Nicolais, LLC, a Denver-based real estate investment company, and instructor of the Real Estate Investment course from Harvard’s Division of Continuing Education Professional & Executive Development. “Not only is it the most ubiquitous asset in the world, but there are so many different ways to interact with it.”

Why is Real Estate Investing a Good Career?

According to Nicolais, real estate investing is a career that offers advantages you won’t find in many other types of work.

Real estate investment can be combined with other jobs, family commitments, and school obligations. You can ramp up investing during periods when you have more time, and scale back when you don’t. You can set your own schedule and personal priorities. You don’t have to work out of a conventional office. And you don’t need a college degree, either. 

“Real estate is incredibly entrepreneurial,” says Nicolais. “And it’s something you can do your entire life. If you start today, you can be investing in and managing real estate and doing entrepreneurial investing for decades.”

How to Start a Career in Real Estate

If you’re intrigued by the idea of buying investment property, owning your own rental home, and enjoying all the potential cash flow, how do you begin? 

According to Nicolais, new investors should keep a few fundamentals in mind. They need to be educated about the field, develop a smart business strategy, and spend some time reflecting on what type of investor they want to be. Let’s break this down.

Get Educated

While you may not need a college degree to enter this field, you still need to educate yourself about the real estate market. 

According to Nicolais, there are two options: learn about investing in the classroom, or you can learn in the marketplace. Educational programs can provide a solid foundation of knowledge in a short amount of time. Learning through experience takes longer. 

Nicolais recommends educating yourself by doing a bit of both — taking courses to learn the basic principles of real estate investing, while also dipping a toe into the market when the opportunity comes along. Both are critical for understanding and developing a full, holistic view of the world of real estate investment.

Some options for a classroom education are:

• Taking a course. Universities and real estate trade groups (the National Apartment Association, the Institute of Real Estate Management and the Building Owners and Managers Association, for example) are some of the best resources for grasping the fundamentals in this field. You’ll learn how to assess potential investment opportunities, conduct real estate market analysis, develop investment strategies, and raise capital. Courses and classes can provide a framework for understanding what’s happening in the real world and can help you avoid potential pitfalls. 

• Earn a certificate. Earning a certificate in real estate investment can provide practical, hands-on experience in creating financial models, analyzing cash flow and measuring returns on real estate investments. Typical courses offered in certificate programs include Principles of Real Estate, Real Estate Finance and Investment, and Real Estate Enterprise Management. Additionally, banks and investors are often more receptive to those who can prove their knowledge about the business by earning a certificate.

• Be cautious about coaching. There are many online and live coaching programs that say they will provide novice investors with advice from experienced real estate investors. While some of these programs are legitimate, many aren’t, cautions Nicolais. If you’re interested in seeking coaching, be sure to check your coach out with any one of the large and respected industry trade groups (such as those listed above) and to check online reviews.

Build a Business Strategy

Real estate investing can be lucrative, but you must have a plan. 

Successful real estate investors understand three critical aspects of the business: 

• They understand what the market needs. What are the demand drivers in a neighborhood or city? What is not being provided? Once you understand what’s missing, you can seize the opportunity to create value. And it’s in creating value for others that investors make money.
  
• They understand themselves. They know what kind of lifestyle they have and what kind of lifestyle they want through a real estate career. 

“Real estate involves making long-term investments and taking risks,” says Nicolais. “You have to understand your risk preference. There’s a phrase in Wall Street which is repeated often: ‘You can eat well, or you can sleep well, but not both.’”

• They understand what they’re getting into. Many people fall in love with the idea of fixing up and flipping houses. Nicolais says those people will find his courses as helpful as those who don’t intend to flip, but they need to be realistic about the difficulties of the fix-and-flip business model. 

For example, the fix-and-flip model still includes investing your own money up front, with no guarantee that you’ll make a significant profit when selling the property to someone else. 

Start Networking

Many real estate blogs repeat the well-worn dictum that in real estate, networking is everything. 

But according to Nicolais, it’s not that simple; you need to do the right kind of networking. He recommends attending industry conferences to meet other professionals, such as those hosted by the National Apartment Association, the Urban Land Institute conferences, or the Institute of Real Estate Management.

Nicolais is critical of traditional networking advice that exhorts newcomers in the field to be active on social media and attend a lot of open houses. Instead, he says, new investors should instead concentrate on meeting “the respected craftspeople of the industry.” 

They’re primarily found, he says, at trade association gatherings and at accredited universities. 

“That’s where these people go, because they have that spirit of personal growth and professional growth. That’s where you want to network. It’s the quality of networking, not quantity.”

Launching Your Real Estate Business

With a business strategy mapped out, a new real estate investor can begin to do the more detailed work of starting in earnest. That means picking the best property location, determining the best rental strategy, identifying potential renters, and figuring out the return on investment. 

Even once a property is found and purchased, there are many other skills that must be learned involving property management, including enforcing leases and developing a robust accounting system. If you decide not to manage your property personally, you will need to find a property manager to do it for you. 

While managing a property may seem peripheral to those more fascinated by the allure of buying and selling, it is not. Understanding how to manage a property is key; real estate must be managed well in order to make money.

In the final analysis, real estate investment can be a very rewarding career both financially and emotionally, says Nicolais. 

“There’s an interesting thing that happens in real estate, where you come across people who have ‘made it,’” he says. “But there isn’t that milestone moment. It is simply a process…It really is the journey. When it becomes about the journey, instead of that specific milestone, you realize that it has become your life. And it’s been a wonderful, wonderful life.”

If you are interested in learning more about how to get started in real estate investing, Harvard DCE Professional & Executive Development offers a two-day course that will help you master the fundamentals.