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3 tips for investing in your first piece of real estate

People can earn a lot of money from real estate investments. However, just like every other type of business, it can be risky and complex, especially when you are first starting. While it may be a lucrative endeavor, you want to be careful not to make costly mistakes.

Investing in real estate requires a significant amount of funds upfront, which is why you want to do your best to make it profitable and protect yourself from a big loss. Here are several guidelines to help you with your first investment real estate transaction.

1. Do some research

It is ideal to approach real estate with an analytical and logical mindset. You want to understand the basics of investing in real estate and how prospective property will work for you. In order to get some essential knowledge about real estate, you may want to read books or attend seminars. Buying in your area and looking into the local economy and demographics will help you make the right decisions.

2. Be ready for a bigger down payment

At first, it is easy to assume that you will be able to make a down payment of 3 percent on your rental property. Unfortunately, mortgage insurance does not apply in this situation, so you do not get the benefit of a low down payment. Most down payments for investment properties are around 20 percent. 

3. Start modestly

Even if you have the funds and aspirations to pour lots of money into your first investment, you should opt for something smaller at the beginning. Try out something in the lower or middle price range. Good properties to start with include small homes, single apartments and duplexes. This will help you get an idea of whether you should pursue investment properties further. 

Real estate can be an advantageous investment if you play your cards correctly. Keep these pointers in mind as you pursue your first property.