Investing for Beginners: How to Get Started in Real Estate Investment
Real estate investing is a time-trusted method of earning additional income, diversifying and building a real estate portfolio, and building lasting wealth. However, the real estate sector is quite complex and takes lots of skill, effort, and dedication to maximize its potential.
Many modern investments today involve buying some company stocks and waiting for them to appreciate. While this simple way of investing may appeal to many people, real estate investments more often than not require a committed, hands-on approach to make it work. The rewards of a successful real estate investment can be tremendous and last for generations.
Suppose you’re interested in real estate investing, here’s all the information you need to get started.
Why Invest in Real Estate
Before learning how to get started in real estate investment, you should look at some of these reasons why real estate is an excellent investment option.
- Real Estate Investments Are Pretty Safe
Unlike investing in fiat currencies or volatile stocks, real estate investments are relatively safe. If the stock or currency market crashes, your investments may be worth next to nothing. But real estate assets rarely lose value, and even when they do, it’s often for a short while before bouncing back again.
- Opportunity for Diversification
The most successful investors are those who don’t put all their investment eggs in a basket. Diversifying your portfolio through real estate helps you cushion the effects of a downturn in some other sector or even offset the losses you may incur.
- Real Estate Assets Typically Appreciate
The housing market is almost always on the up. If you hold it long enough, there’s a high probability that your investment asset will go up in value. You can also increase the value of the property by renovating and adding amenities.
- Real Estate Investments Provide Cash Flow
Stocks and investments may provide quarterly or annual dividends accessible only when you sell. Real estate investing can earn you monthly cash flow from tenants or guests who rent the property.
- You May Not Require Much Capital
Many people wondering how to get started in real estate investment often conclude that they need lots of capital. The truth is you can invest in real estate with little money if you have a decent credit rating and can find the right property. In many cases, you may only need to put down about 20 to 30 percent of the original property price.
- You Can Leverage Equity
You can use the equity on a property to invest in other assets, meaning that you don’t have to wait till you have enough money to acquire a second property.
- Fewer Taxes
Real estate investors enjoy tax breaks because of their contribution to land development. When you invest in real estate, you may qualify for tax deductions on property, repairs, maintenance, travel costs, etcetera.
- Great Retirement Plan
Real estate is a long-term investment that can continue to earn equity even after you’ve retired. You can also choose to liquidate your investment and use the profit to see you through retirement. Another option is to will the property to your descendants, letting you defer some of the taxes.
How to Invest in Real Estate
Figuring out how to get started in real estate investment is relatively easy with the proper guidance. Here are some guidelines for investing in real estate for beginners:
- Set Your Investment Goals
It’s essential to define what you want out of your investment. You should clearly state your long and short-term objectives for your business as they’d help you stay focused and direct your actions. Most people recommend that business goals follow the SMART model – specific, measurable, achievable, relevant, and time-bound.
- Educate Yourself
Absorbing all the information you possibly can before making your investment is crucial. You should research your target market, preferred niche, competition, seasonal trends, rental prices, and all other relevant information. It might be helpful to seek the counsel of an experienced investor to help you through this process.
- Sort Out Your Finances
You still need some money, even if you’re going after cheap ways to invest in real estate. Take stock of your financial situation and find the financing option that would be most suitable for your investment.
- Devise an Investment Strategy
Equipped with adequate information on the sector and how much you’re willing to invest, you should begin to develop ideas on a strategy most suited to your short and long-term objectives. You may want to create a business plan at this stage. You also have to start thinking of marketing plans for your investment. How do you intend to make potential clients aware of your business?
Email marketing, social media, bandit signs, and networking are marketing options you may explore. You may also consider creating a website for your business. You also want to start building a personal network of friends, colleagues, mentors, clients, and realtors to help grow your new investment.
Ways to Invest in Real Estate
Here are some of the best ways to invest in real estate as a beginner:
- Investing in Rental Property
Buying a property and renting it out monthly is the most common way of investing in real estate. Here, you make money by charging more than it costs to run the property.
- Home Flipping
You can buy a property that needs renovation for a low price, then renovate and sell for a profit.
- Investing in Real Estate Investment Trusts (REITs)
REITs are publicly-traded real estate investment companies. You can buy shares of the company on the stock market and earn quarterly or annual dividends on your investment. Buying a REIT is the easiest way to invest in the real estate sector.
- Real Estate Syndication
A group of investors can pull their resources to invest in real estate. Syndication increases the buying power of investors who earn profit from monthly rent and property appreciation.
Final Thoughts
The usually complicated real estate sector can seem daunting for a new investor. But with the right amount of education, guidance, and commitment, anyone can get up to speed with the sector and become a profitable investor within a relatively short period.
Hopefully, with this guide, you’re on your way to making money from real estate investments.
