Real Estate Investing for Beginners

Learning how to invest in the real estate market can be difficult for new investors. Many beginners are unsure of which properties are worth their time and effort.

Before you sink thousands of dollars into a project, take the time to discover how you can best maximize your profits. From real estate investment trusts to flipping houses, you can invest your money into various real estate projects depending upon your personal skill set and what you hope to accomplish through your investment.

Before you commit yourself to the idea of investing in one endeavor over another, take the time to research the current real estate market in your area. This can help you determine the best place to start your next project, as the potential for a rewarding investment can vary by area. The information in this guide can set you on the right path toward establishing a fruitful investment in the world of real estate.

Start with Real Estate Investment Trusts

One of the easiest ways to begin a real estate investment as a beginner to the market is to start with real estate investment trusts. These trusts, otherwise known as REITs, provide you with the opportunity to invest in real estate without having to select a specific property to devote your finances to. REITs function like mutual funds. The companies offering REITs to customers are the owners for commercial real estate properties, which are the buildings you are investing your money into. Common REITs include:

  • Office buildings.
  • Retail spaces.
  • Hotels.
  • Apartment buildings.

By starting your investment career with a real estate investment trust, you are learning the essential functions of property ownership without having to oversee the care of a physical building. This type of investment typically works best for individuals who are entering retirement, as you often do not see an immediate return on your investment through this type of opportunity. If you are seeking regular income from your real estate investment, you may want to consider other ventures. REITs typically work best for investors who want to reinvest their earnings in the future.

Related Article: Common Types of Investments

There are several different forms of REITs you can purchase depending. Some REITs available on the market today can be purchased like stocks, which you can then exchange if you are interested in reinvesting your earnings into a new venture. If you are not interested in publicly traded REITs, you can instead purchase non-traded REITs. These may be purchase with the assistance of an online broker. Many REIT opportunities call for the assistance of a brokerage account, which you want to establish before you begin to try your hand in this business.

It is important to note many REIT opportunities require the buyer to provide a minimum investment. You are strongly encouraged to spend time exploring the different options before you invest in one trust over another.

Learn How to Invest in Rental Properties

If you are just starting out in the world of investing, placing your money into a rental property can be a good jumping off point. This opportunity allows you to become familiar with the idea of being a landlord. You can choose to live in your rental property through the summer and enjoy the benefits of having a secondary residence, or you may choose to rent the property year-round if you have found an appropriate tenant. This allows you to make a profit while also gaining the necessary experience to be a good landlord.

If you are uncomfortable with the idea of maintaining the home as a landlord, you can use the money you receive from the rental property to cover the cost of hiring a property manager. By hiring a property manager, you are allowing someone to oversee the day-to-day needs of the tenant and any potential issues he or she has while renting your property. Rental properties typically do not require the same level of care as other real estate investments. Many new landlords only choose to rent their residence for short-term leases while they become comfortable with owning property.

When you are choosing a rental property to invest in, consider starting your search in an area where you would like to visit. Landlords are encouraged to visit the area, as they may choose to occupy the home intermittently throughout the year. Additionally, if you select a home in an area where there are amenities available for renters, such as proximity to a beach or a popular shopping mall, you are increasing the amount of money you can charge per week or per month. This increases your profits and allows you to have a larger selection of potential renters to choose from when you are deciding who you want to occupy your home while you are not there.

Flipping Houses is a Lucrative Startup

If you are skilled at making replacements and repairs, consider investing in a fixer-upper house. If you purchase a home in sub-par condition, you can typically buy this home for significantly less than what you would pay for a nicer home in the same area. You must ensure you are making a strong investment before you proceed with this investment, as some repairs can become more extensive once you begin your flipping project, or initially be outside your skillset.

When you are starting to invest in property, it is recommended you start by purchasing a home requiring minimal repairs to gain a better understanding of how much each project costs. For example, you may want to select a home to buy on the lower end of your budget that only requires a fresh coat of paint or a quick replacement of the kitchen floors or backsplash. Do not start out by flipping homes requiring extensive repairs, as you may end up spending more money than you are making in the process.

To ensure you are maximizing your profit with your investment, you want to spend time exploring the different neighborhoods in your area to determine the median home price, proximity to schools and the current crime rate. Each of these factors affect the amount you receive for the home once you are ready to place the home on the market. The more time you spend researching, the better off you are when it comes time to sell.

Related Article: How to Find the Perfect Financial Advisor for You

It might also interest you: