I’m sure we’ve all heard of real estate investing at least in passing. It’s a great way to make a passive income and is a long-term investment that can be incredibly bountiful with time! But, learning to invest in real estate can be a daunting task — especially as a total beginner. Trust us, you’re not alone in feeling this way.
If you’re looking for a guide on how to get started (and succeed!) in real estate investing, you’ve come to the right place. This article will cover what real estate investing is, some viable strategies, and we’re also going to throw in tips to accelerate your progress.
What Is Real Estate Investing?
When most people think of real estate investing, the first thing that pops into their heads is single-family homes. While houses are an important facet of real estate investing — there are many viable investment options that go under the real estate label. Real estate itself is technically land plus whatever man-made structure was built on that land.
The most popular forms of real estate investing currently include residential, commercial, and industrial real estate investing.
The core of real estate investing is that an investor purchases or rents a property, and chooses a strategy to make a profit from that real estate.
How to Make Money Real Estate Investing
Generally, the profit that comes from real estate will come in the form of passive income. Passive income is earnings that come from your property in which you are not actively involved. In a real-life context, you could be working or sleeping — and still be generating income through your investments!
Here are the two most common variations of passive income:
Rental income is when you rent out your properties to tenant(s). Whenever you have tenants, you will be earning a monthly income. Your level of involvement is largely up to you. You could work on the day-to-day chores (e.g. maintenance, finding tenants, etc) by yourself — or you can work with a property manager to make the process more passive and hands-off.
Not only will you earn by collecting rent, but you will also make money through appreciation. If your property appreciates, that means the value of the property has increased since you originally bought it.
When considering if a property will appreciate and how fast the appreciation process might be, the most important factor is to consider the neighborhood. Desirable locations located near plenty of opportunities will yield better results than a property in a run-down neighborhood. Some investors like to look at trends and statistics to predict the next “big” investment opportunity before they occur.
Viable Real Estate Investing Strategies For Beginners
Now that we’ve covered the basics — the next hurdle is to understand real estate strategies. For this blog, we’ll prioritize strategies that are suitable for beginners. Don’t worry, let’s take it slow and easy!
This form of real estate generates profit from being leased or rented to tenants over a set period of time. Think apartments and single-family homes.
When you invest in rental properties, you become a landlord and bear all the responsibilities of that title. As the landlord, you’ll need to stay on top of things like paying the mortgage, insurance, and property taxes, maintaining the property, and creating listings to find tenants. Make sure you can handle the responsibility when tackling rental properties.
A real estate investment trust (REIT) is created when a company is formed to use investors’ money to purchase high-budget investments. Think malls, skyscraper offices, healthcare facilities, and other pricey builds that can yield great returns but can often not be purchased on a single budget.
An investor will give money to the REIT, and receive a regular income through dividends. There’s also an opportunity to receive appreciation benefits from investing in REITs too. Unlike other investments, REITs are highly liquid — meaning that you can convert your investment to cash readily.
REITs are sold and bought on major exchanges just like stocks.
Real Estate Wholesaling
As a wholesaler, you would contract a home with a seller and then find an interested party to buy it. Unique to real estate wholesaling, you don’t own any property from beginning to end. So, how do you make money? The wholesaler contracts the home with the buyer at a higher price than with the seller, allowing them to keep the difference as profit.
Real estate wholesaling doesn’t require a lot of money to get started and can be viable for beginners with little capital to no capital. Once a beginner builds up capital, they may choose to invest in other forms of real estate as well.
Tips to Accelerate Your Progress
There’s no clear and straight path towards success in real estate investing. But, there are certain things that can make your financial dreams come true faster.
Here’s what they are:
Know Your End Goal
Before starting your real estate investing journey, draft a business plan. Have a clear idea of where you’ll ideally be in the future and why you’re investing in the first place. Are you trying to save for early retirement? Are you trying to live a lavish life? Not only will visualizing your why motivate you, but it will also guide you on which strategy to take.
Create a roadmap for yourself, and you’ll be much less likely to lose sight of the end goal!
I’m sure you hear about the power of networking all the time — but it’s really true. Attend as many networking events as possible, and actually talk to people! Having a strong network can help you break into the real estate investing scene and offers you a major advantage when it comes to new opportunities.
Also, it’s just a great way to start learning from your peers.
The best way to learn anything is to simply just do it! Of course, take time to read and learn about real estate investing first. But, there comes a certain point when you’re ready to start but your fear is holding you back.
Take the leap, just start, and your future self will be thanking you!