Real estate investing has always been popular with those who would like to add to their income or diversify their investment portfolio. There are thousands of books, websites and other media outlets proclaiming the ease with which one can become wealthy through real estate investing. For those who are new to real estate investing (especially commercial real estate), it’s important to understand that this industry is quite competitive and that success requires time, hard work, and a willingness to learn and employ proper strategies.

Here are four tips to get you started:

1. Line up funding. Before you even begin to look for properties, you should determine how much you have to invest. This is important even if you’re going to apply for loans or borrow funds from family or friends because you should never invest more than you can afford to lose. Banks and other institutional lenders are not always willing to lend funds for investment-purpose real estate purchases, so it is a good idea to connect with local hard money (private capital) lenders in your area even before you have a deal in place. They can give you advice about the kinds of loans they are willing to fund.
2. Buy below market value. One of the main ways to make a profit investing in real estate is in rehabbing distressed properties. Finding properties, often foreclosures, that are listed below market value gives you a wider profit margin for the repairs and improvements. While the housing market recovery means fewer foreclosures, they are still there if you know where to look. If you’re new to the area you’re investing in, a foreclosure listing service can be a good way to get started. Realtors can also be a good source for below market listings.
3. Learn about taxes. When you’re calculating the costs of real estate investing, it’s important to consider all of the tax implications before you purchase a property. For these reasons, investing close to home, where you are familiar with property tax laws, can be a good place to start.
4. Diversify your property portfolio. Diversification is just as important in your real estate portfolio as in a stock portfolio. Savvy investors don’t choose investment properties that are all a single type of property or in the same area. You can do this by purchasing investment-purpose residential properties in different parts of town, or mixing it up with multi-family or multi-use rental properties. It can also be a good idea to have both rehab projects and income-producing properties. If you want to diversify your portfolio but don’t have experience with that type of property, it’s a good idea to seek out others who do have experience with it to help you.