I'm actually just starting out and fell into it all at once and had a few friends who have been doing it for years, so I called them up for the advice.
Let's start from the bottom up: I love stocks. I love investing into the stock market, but it was a wake up call when the tech stocks crashed and the market was going crazy. Is it better than stocks?
Real Estate is often a bit more stable than the stock market because it can be better predicted. If the houses around you are selling for X dollars... chances are, your house will too. A house is never going to be $0, even some of the houses in really bad shape that still have their structure and foundation cannot go down to $0. Stocks are a bit of a waiting game and they have their advantages and disadvantages, but you can't do anything to make extra money on them.
For a house, make the extra money on it by renting it out, improving on the structure itself, and after you pay off the mortgage (or even if you don't pay it off), sell the house for more or hold on to it. Housing is supply and demand with many opportunities to take advantage of. Most people got a very amazing surprise in 2020, especially those that had just closed on their homes, only to see the values go up by $100,000 the very next day. However, people buying houses at those prices... they might only see a $20k or $30k increase over the next few years. There could also be a housing crash though at this moment, its unlikely.
So now let's get into your top questions: What advice would you give to someone who is considering investing in real estate for the first time? What are some important factors I should consider before making a purchase?
This depends on what type of investor you are. For most appraisers, the only thing they care about is the square footage and everything in between and top to bottom. Thus, they value the house and structure, nothing more, nothing less. For others, they may also include in the view. For me, I love a damn good view. Nothing like waking up in the morning and opening your windows to an ocean or mountain view vs. a bunch of other houses that allow your neighbors to see you naked. I just don't care to be staring at neighbors' houses when I look out of the window. I value privacy more than I value neighbors. I also like to buy places that are "centrally located" meaning they are within walking distance to entertainment, food, movies, gas stations, etc.
I also tend to prefer buying condos than houses, but this comes with the overhead of an HOA fee to maintain the property. Pros and cons to this wherein someone else maintains the property and I just have to worry about insuring the inside walls, but condos are slower to increase in value than houses are. However, I prefer to rent them out, pay off the mortgages, and make the profit from that.
Going back to the stock market real quick: I could've kept money in the stock market and waited to take that out and retired at a certain time. Or I can hold on to mortgage-free places and live off that income every month. Plus, if you hold on to it for 30+ years, inflation and cost of living is going to give you more money in your pocket. Real Estate does require a bit more work upfront, but seems to pay off and is more predictable, while the stock market -- has its ups and downs and its knowing when to hold em and when to fold 'em , as the Late Great Kenny Rogers sang.
So let's talk about two friends I have.
Friend #1: George.
Friend #2: Joe.
George is more of a risk taker and a lavish spender, while Joe is more calculated and likes to save his money.
George uses the bank's money all the time. He barely ever uses his own money. He is always pulling the money back out of his properties to re-invest in new properties. The upside is: he's not using much of his own money. The downside is: those houses technically always belong to the bank.
George owns 10 houses. He said, "Every month, it's like Christmas when I get those rent checks coming in." George takes out the equity of the house and puts that money into another house. He's always buying something -- just bought himself a trailer park somewhere in the midwest. Anyways, George said, "I don't care about views. I don't care about location. I care about how much is my ROI. If I put $10k down on a house and I'm renting it out for $2000 a month and I'm making $1000 a month on that house, that house only cost me $10k, that's a good investment for me." George will buy any house in any location as long as he can make money on it. George always knows he will find a renter so he doesn't care where he's buying.
Joe owns his own limo service located in three major cities across the USA and gets a lot of his money from his business, so he tries to buy houses outright and pays off the mortgages pretty quickly so he's making pure profit from rent and owes nothing to the bank.
Joe, on the other hand, is more about location. He bought every single house on his block, 10 houses total, all of them with mountain views in the backyard, that were next to his house. Joe values the fact that he can keep an eye on all his houses everyday. He would go to his neighbors, ask them if they were interested in making money while either still living on the property, or moving away. Many neighbors wanted to move, while others were older and ready to receive that paycheck upfront so they could go traveling and things while still being able to live in the house. He would assume their mortgages and pay the difference of what they were asking.
Two investors in real estate, but two very different types of investors. And me being the third: I love location. I value location as much as I value the property. Start small if you want. Nothing too crazy. If you're not good at fixing up properties, than buy something that was already remodeled. If you are good at fixing up properties and have handimen friends to help.. you'll save a ton of money, especially by buying worn down properties, restoring them, and reselling. This is another type of investor. Real Estate has tons of different types of investors. I hope this helps a bit. Take a leap of faith.. the worst thing that is going to happen is that you find yourself not interested in doing it anymore and you just sell the property. If you aren't going to do it.. there's a hundred other people who will. There are even women-owned companies buying up houses and doing everything from renting, renovation, and reselling.