Investing in real estate: five tips

Have you got a keen eye for trends in the world of real estate? If so, what's stopping you from becoming an investor?

For those who know what they're doing, the world of property investment is a lucrative one. Here, we run through five tips for investing in real estate, giving you the basis for a profitable portfolio.

1. Get a mentor

The best way to learn is from experience. The good news is that this doesn't necessarily mean you have to be the one to make mistakes. When you're starting out with real estate investing, the advice of someone who's been through it all before can be hugely valuable. The first step is to find yourself a mentor and probe them with questions. They'll help you spot red flags in the early stages, and give you tips on how to navigate the common hurdles that come with buying an investment property.

2. Learn your markets

Experience is essential, but this alone will only get you so far. Property markets are changing all the time, and the key to finding yourself a good deal lies in keeping your finger on the pulse. Remember that market knowledge has several levels: local, national and international. Insight into all three is vital; this is where the help of a professional real estate agent will be invaluable.

3. Identify the income source

There's more than one way to make money from buying an investment property. However, it's important that you don't allow this to interfere with your investment strategy. Strategy is an important word here and is central to any tips for investing in real estate.

From the beginning, you must be clear about what your income sources are. Are you buying in an emerging market, banking on the value of the property to soar in coming years? Perhaps you're buying for a steady source of income, based on renting? If so, you need to ask yourself whether you're keen to invest in commercial property, or are going after the student rentals market, for example.

4. Diversify your portfolio

One of the most basic tips for investing in real estate is also one of the most important – diversify. Every investment carries an element of risk, so it's essential that you prepare yourself for the worst case scenario. By far the easiest way to do this is to spread your risk.

In short, this means investing in multiple properties rather than pooling all of your capital into a single project. This safety net is key to the longevity of your real estate investing.

5. Understand the costs

There's great potential for profit in the world of real estate, but only for those who have a clear understanding of their finances. Making money is about balancing the books, and that means keeping a close eye on your outgoings as well as your income.

The major costs for investing in real estate in the UK are Stamp Duty, Land Tax, Capital Gains Tax, and conveyancing fees. Be sure to educate yourself on the precise fees in your country of investment, so you don't come across any unexpected costs later in the buying process.

These tips for investing in real estate will give you a solid foundation upon which to build a portfolio, but there's plenty more still to learn. Enlisting a professional real estate agent to help you find an investment property is the first step to a successful career in investment.