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With approximately 676,000 homes sold in the United States in June 2021, real estate investing can be a rewarding financial decision.
Numbers and statistics will always be enticing, but do you know where to start investing in real estate? For example, will you be looking into residential, commercial, or industrial real estate investments?
If you aren’t quite sure where to start, it is okay. That is why we’ve created this beginner’s guide to investing in real estate – just for you.
So go ahead, read on and learn about the potential wealth waiting for you behind one of the globe’s most lucrative markets.
What Is Real Estate Investing?
Real estate investing is the purchase of real estate, plain and simple. Do you know what real estate is, though? The definition of real estate is any piece of land or property attached to the land.
Therefore, anything natural, part of the land, or manufactured on the land is defined as real estate. It can become confusing when you hear people swap terms around, such as real estate, land, and property. To be clear, the land is a natural surface or airspace of the earth itself.
Real estate is the combination of land and any permanent man-made structures like a building. Real property is the number of incentives and benefits that are attributed to you owning real estate.
When you consider these definitions, you will understand that investing in real estate is the process of purchasing a piece of land with any man-made additions to that land. You should already know the most popular forms of real estate from the introduction. They are residential, commercial, and industrial real estate.
Investing in real estate may seem more expensive than other investments, but it is by far one of the best ways to grow your wealth. So, how exactly do you make money investing in real estate?
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How Do You Make Money Real Estate Investing?
With 227,000 houses sold in 2020 with prices from $300,000 to $399,999, you know that money is available in the real estate market.
How exactly do you make money on a real estate investment, though? Where do you start? Lets’ look at the two main methods of real estate investing ahead.
1. Real Estate Value Appreciation
Historically, most property values increase with time. This increase in value is known as appreciation.
According to a real estate expert, one of the main factors behind positive appreciation is the location of your real estate investment.
If a particular neighborhood is perceived as desirable, so will the real estate. If you have experience with home improvement and renovation, don’t be afraid to purchase a less-than-desirable home in an exquisite location. The investment is almost always worth the effort.
2. Real Estate Rental Income
Not all real estate investors will want to rely on value appreciation alone. In some instances, an investor may either live on the property or want to find ways to generate income for a vacation home.
Either way, most real estate investors seek to obtain wealth by generating rental income. By renting a property, you gain the advantage of real estate value appreciation and a monthly income.
Hiring and choosing the right property management company can help you keep a hands-off approach to property management if you don’t live on the property. Your goal is to allow the property to generate enough money to pay the mortgage, afford hands-off management, and send you extra profits for further investments or improvements.
Are There Strategies for Real Estate Investing?
Since you are just starting in the real estate investment business, you will naturally feel confused a lot.
Don’t panic if you need a few months before making any significant investment decisions, and frankly, not all your investments are going to be a roaring success. Maybe, as a beginner, it is better to start in an entry-level real estate investing niche before moving on to more complex real estate investments.
Then, not only will you lower the barrier of entry regarding capital needed to invest, but you will also significantly reduce your capital needs to start investing. Here are the five best real estate investment strategies for beginners.
1. Real Estate Wholesaling
This real estate investing strategy will allow you to act as a middleman between a buyer and a seller. As a wholesaler, you work to identify and purchase property under market value and assign the purchase of that property through a contract to an end buyer.
2. Real Estate Prehabbing
This strategy is positioning a piece of real estate for resale by purchasing minor, aesthetic improvements for the property. An investor will then take a look at the progress and decide if it’s worth continuing to improve the property.
3. REIT Investing
A REIT is a real estate investment trust that operates as a company that owns and manages various income-generating real estate properties.
As an investor, you can purchase shares of the REIT and benefit from its profitability, depending on the amount of stake you own. This allows you to invest in real estate without actually owning any physical property.
4. Online Real Estate Platforms
Online real estate platforms connect investors like you with developers in real estate. Investors will then help finance new and existing real estate projects in exchange for monthly and quarterly repayments often with interest.
5. Purchasing Rental Properties
Rental properties are the tried-and-true way to secure a monthly income stream by operating as the landlord of a property.
As we mentioned before if you don’t want to manage the property yourself, hire a reputable property management team for assistance.
Do you feel any better knowing that you don’t have to invest a significant amount of capital in starting to invest in real estate? I know that it makes us feel great.
It’s Time to Start Investing in Real Estate
Real estate investing has proven to be one of the most successful financial investments year in and year out.
The only challenge facing you is learning more about how to invest in real estate. If you are willing to take the time to research and educate yourself while seeking professional help when needed, nothing can stop you.
So, take your time and enjoy the ride, find which strategy works best for you, and keep learning. We hope you enjoyed this beginner’s guide to real estate investing. If you did, feel free to head over to the blog for more great real estate investing information. See you there.
