Are you thinking of getting started in real estate investment? That’s not surprising. With the real estate investment market holding a value of $8.9 trillion in 2018, it’s one of the most popular forms of investment out there.
Of course, knowing how to get started with real estate investing is essential if you want to find success. Below is a beginner’s guide that will help you begin your journey to invest in real estate.
Understand the Investment Strategies
There’s no one right way to invest in real estate. There are many methods available that will help you put your money to work. Here are a few of the most popular ways.
Buy-and-Hold
The buy-and-hold strategy is for people who have a long-term outlook on property. It’s for people who want the value of their homes to go up over time. It’s a long-term strategy that will need good financing to make it work.
In most cases, you’ll turn the homes you buy into rental properties. This way, you’ll get value from your home’s appreciation and passive income for rent. In many cases, your rent payments will cover your mortgage, so you won’t often need to worry about not having the funds to pay your debt.
Fix and Flip
The fix and flip model is great for people who don’t want to hold property long-term. Your goal is to find undervalued homes that need work done on them. Once you find a property that fits those requirements, you invest in fixing up the house and selling it at a profit.
This form of investing is less passive than the buy-and-hold strategy. You’ll need to stay on the hunt for new properties to buy. You won’t get passive rental income with this strategy.
Of course, you’ll also have more liquidity with this method. Your money is tied up in the buy-and-hold strategy. The fix and flip model is great if you want to keep larger cash reserves.
REIT
Even if someone is interested in real estate, they might not want to spend the time hunting for investment properties. They might have other jobs or just might not want to put in the work. For these people, investing in a REIT is a great option.
For a REIT, all you need to do is give your money to an investment trust. This trust will then go out and use investment funds to search for investment properties. You’ll get a dividend for your investment based on the income the REIT generates.
Get Your Financing Ready
Even if you have the money to buy a property in cash, you might not get far with only one real estate investment property. You’ll need to wait a long time before you make your next investment.
If you want to scale your investments fast, you’ll need the right financing. This means you can put smaller down payments on homes and spread your risk around multiple properties.
Talk to your local lending services to see what residential and commercial real estate lending rates are like. Talk to at least three mortgage companies to try and find the best rates and terms for what you want to do with your investment money.
Legally Protect Yourself
While it’s easier to get started with real estate investing with your personal accounts, it also opens yourself up to risk. You’re going to work with a variety of people. It’s a big issue if something ever goes wrong.
If you don’t have legal structures in place to protect yourself, you’ll be on the hook personally for any damages that occur on your property. When those damages are severe, that’s the last thing you want to happen.
Look into the legal structures available to you before you start investing in real estate. In most cases, you can easily set up a company to handle your real estate investments. Once your company is set up, create a separate checking and savings account for the business.
Doing this will insulate your personal accounts and property in case something goes wrong. If you aren’t sure what route to take, set up a time to talk with a lawyer to explore your options.
Pick Your Market
With home prices so high in certain areas, some real estate markets might be out of reach if you’re just starting in real estate. That’s why finding the right market to start in is essential.
Look for up-and-coming areas that have a good chance of going up in value in the future. These areas are often in suburbs that are just outside of city centers. You’ll see a lot of up-and-coming developments in neighborhoods that are rising in value.
Going this route lets you make more investments for less money. If the area goes up in value because of the new developments, you’ll make your money back and then some.
Build a Team
While it’s possible to get started in real estate independently, it isn’t advisable for a long-term strategy. You’ll spend every waking hour working on and fixing up your properties. You’ll need a team if you want an efficient operation.
The good news is that you don’t have to hire employees to make this happen. Much of the work you need to be handled is likely repair work. You’ll need to find the right contractors to make that happen.
Look through the business listings in the area you’re investing in to find highly rated business contractors. Hire a few of those companies to see how well they perform. If they do well, you can work out a deal and have them handle the contractor work on your investment properties.
Now You Know How to Start Real Estate Investing
Real estate investing can be intimidating for someone new to the practice. However, you have a great chance of finding success if you do things the right way. Follow the tips above when you start your real estate investment journey to get started the right way.
Are you interested in learning more strategies for investing? The latest posts on the blog have everything you need to know.
