From time immemorial, real estate investment has always been one of the most prominent ways through which people make money. Wang Jainlin, Donald Bren, Donald Trump, and several other investors have hacked the strategies of investing in real estate and are making a fortune out of it.
As such, everyone must understand the simple methods involved in investing in real estate. If you are working and looking for simple ways to start investing in real estate, take the time to read the following steps listed below:
Determine your financial standing and goals
Before you start investing your hard-earned money into real estate, you need to decide your financial standing as well as your financial goals. The truth is that financial independence and buoyancy is one of the main reasons why people invest in real estate. Nevertheless, if you do not understand your current state and target, you may have a hard time keeping track of what you have been able to achieve.
Anyway, irrespective of your current financial standing, you can start saving more to be able to reinvest your money into real estate property. Overall, understand where you are financially and consider where you want to be. This is essential as you want to start investing in real estate.
Learn the basics of ways to invest and select the right one
Generally, there are tons of real ways to consider and each has comprehensive details that you may have to learn. However, getting started does not necessarily have to be so cumbersome. Try to learn the basics of real estate investing strategies, decide the one you want to invest in, and get started. With time you can learn more as you try to improve your portfolio.
Here are the basic ways through which you can invest in real estate
- Becoming a landlord
Typically, becoming a landlord means that you want to own a property that you will likely be managing. You will have to learn what it takes to be patient with your tenants, deal with their needs, and also satisfy them. This method usually involves a substantial amount of money to get started as you need to deal with maintenance and other important things.
Notably, you can become a landlord and still hire a property management agency to manage the properties for you. This means that you will need to sacrifice some of your profits to pay for the agency. Nonetheless, it will get rid of the stress that comes with managing your property on your own.
- Real estate trading
This is otherwise known as flipping. Real estate trading involves buying properties and selling them within a few months. You need some levels of experience to become a successful real estate flipper. This is because you need to identify undervalued properties that will provide you with enough profits within a short period. Also, you have to invest more in properties within hidden values that can give you lots of profits without the need to renovate or change many things in the properties.
The good thing about using real estate trading as your investment method is that it does not require an extended period to get a profit. Besides, flipping is recommended for people that are still working full-time but want to invest their money into real estate. However, the downside is that you can lose lots of money in it if you are experienced or conduct due diligence when investing.
- Real estate investment groups
If you don’t want to experience the headaches that come with real estate investment, this is one of the best methods you can use. All you have to do is to invest in a company that already owns properties. In most cases, some properties will be awarded to you but the real estate investment company will continue to manage them for you. When they make a profit, you will get your share. With this method, you will get a good income and appreciation without a lot of trouble.
In theory, investing in real estate companies is safe and stress-free. Also, you don’t need any experience or expertise to make money from the properties you have invested in. Despite all these, there is a risk of vacant properties. In other words, your property or different properties of the real estate company may remain vacant for a long period. As a result of this, the management overhead may have significant impacts on your returns.
- Real estate investment trusts
If you are investing in real estate investment trusts (REITs), you will invest your money into a trust or corporation that will use to buy income properties. Over time, the corporation will operate the properties without assigning any particular properties to a specific investor. Also, 90% of the taxable profits will be paid to the investors as dividends by the corporation. With this, REITs don’t have to pay corporate income tax.
It is worthwhile to note that there is a distinctive different between investing in real estate investment trusts and real estate investment companies. The difference lies in the fact that REITs allows investors to investment nonresidential properties, which they might not have been able to do directly on their own. The major drawback of real estate investment trusts is that they are just like stocks. Hence, they do not have the leverage that traditional real estate investment has.
Choose a niche to invest in
Real estate is a big sector; hence, it comprises of many niches. As expected, you can’t invest in all of these niches. Therefore, you need to choose the niches that you are interested in before you start investing.
The most common real estate niches you can invest in include:
- Single-family houses
- Mobile homes
- Mobile home parks
- Small apartment buildings
- Large apartment buildings
- Quads, duplexes, and triplexes
- Townhouses and condos
- Commercial – retail
- Commercial – industrial
- Commercial – office
- Commercial – self-storage
You can choose one or combine a couple of these niches to create a real estate investment portfolio. Furthermore, choosing similar niches can aid the process of managing your investment. Also, make sure that the chosen niches are the best for you.
Have a team of local experts
If you want to invest in real estate with minimal supervision, then you need to have a team of local experts that understand the rudiments of investing in real estate. Some of the experts that you need in your team include accountants, realtors, attorneys, and contractors. These individuals can come in handy whenever you need their assistance to invest in a deal or manage your investment.
Finding the ideal investment
Irrespective of the strategies you have chosen to use for investing in real estate, you must conduct your due diligence before investing in any property. This is to minimize the risk that you will have to face.
Some of the essential factors that you need to consider before investing in any property include:
- Location – this factor determines the initial cost of the property, its profitability, its potential rent or sales, etc.
- Cost – can you afford to invest in the property? Can you access mortgage or any other loan options?
- Condition – you need to be certain that the property in good condition. The condition will affect the repairs, the possibility to flip it, and so on.
- Profitability – the main target of the majority of real estate investors is to make a profit. So, ask yourself whether the property you want to invest in is profitable or not.
Be on the lookout for the best opportunities
In many cases, real estate opportunities come when you are not expecting them. Therefore, you should always be on the lookout for the best opportunities. Similarly, do not rush into investing so that you do not invest in the wrong properties. Hold out for some periods while carefully looking out for any profitable opportunity that may come your way. The key to making a profit is knowing when and where to invest.
Real estate investment has lots of prospects; hence, it is not uncommon for new investors to be extremely excited about investing. However, in most situations, such excitement can lead to making poor decisions that can lead to an eventual loss. So, you should start with low-risk investments.
Unlike high-risk investments, low-risk investments do not offer a lot of profits; however, they are less volatile. Therefore, you have a lower chance of losing your money when investing in low-risk properties. Over time, you can also go into high-risk investments when you have gathered enough experience and expertise in the real estate market.
In summary, if you want to start investing in real estate, you need to equip yourself with the knowledge of the fundamental methods involved. Don’t forget that real estate market is also risky; hence, be careful when investing in any property. Also, you should learn to play it safe by starting small and grow from there when you have a better understanding of the investment.