There are countless ways to invest your hard-earned money these days and real estate is one of them. This guide “Investing in Property for Beginners” has the tips and tricks you need to get started.
Roughly 50% of investors are currently choosing to put their money into real estate versus the stock market.
It might seem intimidating, however there are other ways to work real estate investment on a smaller scale.
Before getting overwhelmed in the rabbit hole of information, take a look at the tips in this article about investing in property for beginners.
Why Real Estate is a Smart Choice
It is always important to think about the ‘why’ before making any financial decision.
In the case of real estate, there are a couple good reasons to invest.
For some investors, it offers peace of mind to invest in material, physical assets rather than stocks and bonds.
Consider Reading: What Is a Stock Portfolio and How Does it Work?
Another great reason is just diversity.
Your retirement income is counting on the market to do well, but the more places you put your money, the greater chance you have of a good return.
Investing in Property for Beginners: Ways to Mitigate Risk
It is also smart to invest in real estate because you can roll with the waves of the market.
If you bought real estate expecting to flip it and then the market dips, you can always rent it out while you wait for the market to come back.
If you intentionally bought a tract of land hoping to build townhouses and that doesn’t pan out, you can parcel off the land and sell it.
There are many ways to manage a real estate investment, it just might take some flexibility.
Property Investment for Beginners
As previously mentioned, there is more than one way to get started investing in property for beginners.
When you are just starting out, it’s a good idea to look at all the options.
Property investment for beginners starts with weighing all the below options.
- On a large scale you can buy a property and keep it as a rental investment. In this case, you would purchase a home and either repair just cosmetics or repair it structurally (sometimes both). Once all repairs are safe, you would rent the property out for more than your monthly home expenses (mortgage and escrow).
- In addition, you can buy a house, fix it up, and sell it to make a quick profit. This option requires the most work and could potentially be a full-time job so it is important to think about your time.
- If either of those options are too big of an investment for you, perhaps you may be interested in real estate crowdfunding. This allows investors to pick and choose specific projects that need funding. You decide how much money to invest and loan the buyer the money who, in return, pays interest on the money.
- Another way of property investment for beginners is equity investing where you would be a part owner of the property and receive part of any profit made on the property. (This is technically a type of crowdfunding.) Depending on how much money you have to invest, you could see phenomenal profit on this type of investing.
- REITs are among the best real estate investments for beginners. The acronym stands for “real estate investment trust”. In this scenario, you would find a company (usually a pretty substantial business) that owns and maintains a myriad of investment properties such as apartment complexes, mini-malls, or medical suites. You would find these companies in the stock market and once you’ve invested, you’ll start earning money off their profits. They are great for beginners because they don’t require huge sums of money.
Now that you have the different options laid out, you’ll want to review the amount you want to invest.
This is a personal and individualized decision. Time is money so be sure to consider your time investment as well.
Real Estate Investment Tips for Beginners
Real estate investment can be as complicated or simple as you like it to be as you can tell from the above list of property investments for beginners.
There are ways that it can go bad though, so making sure you have the right tools to get the most out of your investment is vital.
- First and foremost on the list of tips is excellent research. (This article is a great start!) You will need to dedicate a good portion of time to researching the type of real estate investment that will be a good fit for you.
- Understand the entire realm of costs and budgeting. If you decide that you want to flip a house for either renting or selling purposes, it is essential to consider every penny you have to put into the property. For instance, you wouldn’t want to max your mortgage budget on the purchase of the house when you know it will need a new kitchen. Writing out a detailed budget will save you stress and money on your bottom line.
- Research (yes again!) the location of the property or property to be in cases of crowdfunding. If a builder wants a loan to construct luxurious townhouses but the site of the proposed buildings is in a low-income town or area of a city, it won’t be the best investment.
- Be involved! Real estate investments, including a flip with a contractor involved, should always be babysat. You cannot just throw money at a real estate investment and walk away expecting to get a phenomenal return. For example, if you choose crowdfunding, be involved with where the money is spent along with maintenance expectations.
In Conclusion: Investing in Property for Beginners
Although there are risks in every investment, if you do the best research on real estate investing, you will most likely find a great return on your money.
Taking the time in every single step of the property investing will prove to be worth it.
Investing in property for beginners does not have to be overwhelming so long as you face it with the understanding that research and dedication are the keys to success.