By Subhasree Nag
Property investment is the first thing that comes to mind when considering real estate investing. In fact, when it comes to real estate investments, it is not only about a home or commercial property. Real estate is not always physical property. If you want to invest in real estate, there are multiple options.
This article will teach you about real estate investing as a beginner. Apart from that, you will get a step-by-step guide on how to invest in real estate. Moreover, you will learn basic details about real estate investment options. Hence, to learn more about real estate, read on to the end of the article.
A Guide to Real Estate Investing
Real estate has become one of the most popular investment vehicles in the last five decades. Hence, if you are an individual investor, you have many options for help. However, if you find the real estate market overwhelming, this article will guide you.
Basically, real estate belongs to its asset class. Hence, if you want to diversify your portfolio, you must indeed consider real estate as a part of it. In fact, real estate is one of the best ways you can make money as an investor. For instance, if you become a landlord for a rental property, you can earn through your investments.
On the other hand, if you try flipping, you can buy real estate properties with less value. Then, after you fix up the property, you can sell that property for profit.
Apart from that, you can consider REITs (Real Estate Investment Trusts). With the help of these, you can get indirect exposure to real estate. Also, you do not need to own, operate, maintain, or finance these properties. Additionally, you can also invest in real estate platforms if you do not want to own physical property.
Generally, you can buy REITs with the help of your brokerage account. This is similar to investing in the stock market. However, in both cases, you must have an investment strategy if you want to sustain your investments.
Real Estate Investing for Beginners: How to Start?
When it is about real estate investing for beginners, one of the most common ways is to buy a property and rent it out. However, you might not want to pursue this option if you ever had a landlord. However, there are other investment options as well.
In fact, with some of the best real estate investment options, you do not need to show up at your tenant’s back now and then. Moreover, if you have an investment strategy, real estate can be your most lucrative investment option.
Apart from that, you will also get the chance to diversify your portfolio. This will also help you generate a passive income. Additionally, having a diverse investment portfolio will help when one investment option turns out to be risky. Then, your portfolio will help you spread your risks.
Hence, if you want to make money through real estate investing, here are the steps you must follow:
1. Real Estate Investment Trusts (REITs)
If you do not want to invest in physical property, you must start by investing in REITs. Basically, it works like mutual funds. Here, REITs are real estate companies that own commercial real estate, like office spaces, retail buildings, hotels, apartments, etc.
Hence, many investors consider REITs as a good form of investment for retirement. For instance, if you do not need a regular income, you can reinvest your dividends in REITs, to grow your investments further.
Generally, REITs have varied levels of risk. This depends on the type of REIT you purchase. For instance, you cannot sell a non-traded REIT. Apart from that, these REITs take a lot of work to value. Since you are a new investor, you must stick to publicly traded REITs.
2. Online Real Estate Investing
Many online real estate platforms connect investors to real estate developers. In fact, some investors want to finance projects through debt and equity. In this case, as a real estate investor, you can receive quarterly or monthly payments. However, on the other hand, you must take the risk of paying fees to the online real estate platform.
Basically, this investment option is illiquid, and you need to do a lot of speculation. Apart from that, you cannot unload this investment like you can do with a stock.
Additionally, in some cases, you will need money if you want to make money. Also, most of these online platforms only allow those investors with SEC accreditation. Moreover, you have to earn an income of more than $200K/ year for the last two years.
3. Rental Properties
Once you invest in a rental property, you become a landlord. Hence, it would help if you thought multiple times about whether you are comfortable with that role.
For instance, as a landlord, you must take responsibility in many areas. These include paying the mortgage, insurance, property taxes, property maintenance, dealing with other problems, and, most importantly, finding tenants.
In this case, you can consider hiring a property manager to handle your landlord’s problems. Moreover, depending on your current situation, you should take care of the property 24/7. Hence, there are more pleasant jobs to perform. However, you can lower all these risks if you choose your property and tenant carefully.
4. Real Estate Flipping
This is just the opposite of rental property investments. As a flipper, you are buying property for holding it for a short time. Generally, you have a property for a maximum of three to four months until you sell that property for a profit.
There are two ways of flipping a real estate property:
a. Repair and Update
In this case, you buy a property that you think will generate a lot of profit after performing certain repairs. Once you quickly repair the property and make necessary updates, you sell it at a price that exceeds your total investment.
b. Hold and Resell
With this flipping process, you do not buy a property and fix it up. Rather, you buy a property in a rapidly rising market. Then, you hold on to the property for a few months until its price increases significantly. Thereby, you sell the property for a profit.
5. Buy/Repair and Rent
Another method of real estate investing for beginners is renting a part of your home. This way, you can substantially decrease your housing costs. Moreover, you can make profits as you let the price appreciate in your property.
This method is more accessible than a full-fledged real estate investment. If you have a spare room on your property, you rent it and earn money.
Start Investing Now
When it comes to real estate investing, the best investments are the ones that serve you the best. Actually, you must think beforehand about how much capital you can invest and how much time you have. Apart from that, whenever you want to invest in a particular property, research extensively.
Do you have more suggestions on how to start real estate investing? Please share your ideas and opinions in the comments section below.
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