Before embarking on a new and potentially risky venture, you must be adequately prepared. You wouldn’t go on a long trip without packing a suitcase! And the most experienced travelers know that a checklist ensures all the essentials get packed.

In the same way, real estate investors must prepare before they start their investment journey. It’s all too easy for inexperienced investors to get in over their heads. It takes solid preparation to set the stage for success – do you know what you need to do?

Never fear – we’re here to give you the definitive checklist for preparing for your first real estate investment.

How to Properly Prepare to Invest in Real Estate

Task #1 – Review your financial health.

A firm financial foundation is critical to the success of any investment. This won’t work if you’ve been stuck living paycheck to paycheck! Review your income, assets, and expenses. Too many Americans (over a quarter) cannot pay all their bills each month. Many are one unexpected expense from financial disaster. If that’s you, more work must be done before you’re ready to invest in real estate.

Remember – this isn’t just a problem for those with lower incomes. Even high-earners can fall into the trap of living beyond their means and without a financial safety net!

Task #2 – Stabilize your finances.

Once you’ve assessed your financial situation, it’s time to make necessary changes. Financial stability doesn’t come naturally – it demands discipline! Make it a two-pronged approach: reducing expenses while growing your income. If you’re unsatisfied with your pay, negotiate a raise. Look for a new career, continue your education, or secure a new certification.

Revise and monitor your budget for a few months. Prove to yourself that you can be strict with your money and have room to save, invest, and contribute to an emergency fund. You’ll want to cut unnecessary expenses – sometimes even things you enjoy and love – for better financial standing.

Task #3 – Eliminate credit card debt.

The credit system we have in America has become a necessary evil. We need a credit score to do things like buy cars and houses. This means we take on debt to prove we can handle even bigger debts. One of the easiest ways to build up a credit score is with a credit card – but these can be dangerous! High interest rates are designed to keep consumers in debt for as long as possible to maximize credit company profits.


The higher the balance grows, the more interest builds. If you’ve been stuck on a rotation of credit card balances, it’s time to figure out why. Leaning on credit often indicates that you’re living beyond your means. Many investors utilize leverage, so you don’t want these pesky credit balances adding to your monthly expenses. Pay them off and pay them off quickly!

Task #4 – Bolster your credit score.

A good credit score means easier mortgage approval and a better interest rate. Work on getting that score up – pay your bills on time, reduce your credit utilization ratio, maintain older accounts for longer credit history, and review and inquire about credit reports. Avoid multiple hard inquiries. If you’re shopping around for a mortgage lender, aim for a 2 to 4-week window so multiple inquiries count as one.

Task #5 – Secure preapproval.

Research mortgage options and get pre-approved to understand your borrowing capacity. Now, this doesn’t mean you want to use all available leverage. The pre-approval maximum is often more than is wise. Weigh expected monthly mortgage payments and other ongoing expenses against potential cash flow.

If you plan to work with a turnkey provider, consider their lender recommendations.

Task #6 – Establish your short- and long-term goals.

Why do you want to invest in real estate to begin with? Early retirement? Generational wealth? Financial freedom? Understand what you want from this experience – you’ll make better decisions when you do. Consider overarching goals and small goalposts that move your investments in the right direction.

Plan your exit strategy for each investment, whether holding long-term, selling, or refinancing.

Task #7 – Conduct thorough research.

How does investing in real estate really work? Learn the basics of real estate investing, property management, and financial analysis. Understand how you make money as well as the risks and expenses involved. Read books, listen to podcasts, scour Internet articles, and consult with professionals.

Hone in on desirable markets, explore property management and turnkey options, and develop a rough game plan based on your research.

Task #8 – Learn your chosen strategy.

There are countless strategies real estate investors can employ. Discern which methods align best with your goals and risk tolerance. Then, learn everything you can about that strategy! It may be helpful to consult a financial advisor at this point, too.

Task #9 – Start Small

Don’t bite off more than you can chew. Before you invest, understand the limits on your time and resources. Plan to scale, but don’t rush.

Further Reading: The New Investor’s Guide to Buying Your First Rental Property

Arm yourself with knowledge and know-how. The more you prepare, the better off you – and your investments – will be. Take the first step and talk to your REI Nation financial advisor today.

Our residents stay an average of seven years in an REI Nation property.
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