Home values have been rising by about 3.9% year-over-year, and the trend is unlikely to slow down anytime soon. Therefore, it’s a good opportunity for anyone to begin investing in real estate.
Basically, there are four ways to get started in real estate investing. You can choose to become a direct owner in real estate. You can also make money by buying into a Real Estate Investment Trust (REIT).
You can start a real estate investment group, and pool your money together with other investors who want to buy property. Or you can choose to go the home rentals way.
In any case, check out these real estate investing tips for beginners.
Decide on the Type of Investment
As already mentioned, there are four ways to get started in real estate investing. Always do your homework first before deciding which one is for you.
Realestate investment trusts (REITs)
Realestate investment trusts (REITs) are companies that own or manage commercial real estate. They allow individuals to make passive income without having to purchase commercial real estate themselves.
REITs invest inseveral types of properties, including mortgages, apartments, office buildings, industrial facilities, hotels, shopping malls, and hospitals.Afterwards, these are sold to individual investors in the form of ownership shares.
To start with, you need a broker or financial planner to find the right REIT investment for you. There are a variety of avenues that can be used to purchase REITs. Some can be purchased as shares in an exchange traded fund (ETF) or in an REIT mutual fund. Others are on a stock exchange and can be publicly traded. Some aren’t listed or are privately traded.
With REITs, you need to know when and where to invest. Some might increase in value,while others might even decline. If you don’t want to worry about choosing a specific REIT, invest in shares from an exchange traded fund or an REIT mutual fund.
With this type, the only thing you need to do is find the property, buy it, and then rent it out. The property could be a home, a condo, or an apartment building. Before becoming a landlord, you’ll need to review the property’s expense records and rent potential. You’ll also need a down payment and a property inspection.
Be sure to find a reputable real estate agent who specialises in rental properties. Some benefits of rental properties include tax benefits, capital appreciation, and steady cash flows.
Thanks to the sharing economy and websites, more people can now become landlords. Home rentals via the sharing economy require appropriate management and insurance, financial outlay, and serious commitment.
The benefits of renting a section of your home include the opportunity to meet new people and getting extra cash. An example of a successful website that has profited from home rentals is Airbnb.
Real Estate Investment Groups
As mentioned earlier, this involves pooling funds together with other investors to buy investment property. With realestate investment groups, you get to own a rental property without having tofork out huge sums of money. Also, you don’t have to be responsible for managing those properties.
Before joining a realestate investment group, read the group’s policies carefully. You should also have an exit strategy, just in case. Keep in mind that getting into business with others may not always work out as intended.
Simply put, this is where you lend money to other real estate investors or to a professionally-run real estate fund. You act as an alternative to a financial institution as a private money lender. Mostly, real estate is used as collateral.
Hardmoney lending is becoming an important source of funds for investors in the real estate segment. Unlike banks and other financial intuitions, private money lenders don’t impose strict regulations.
Commercial investors, developers, and builders prefer hardmoney lending as banks often don’t find these kinds of speculative investments attractive.
In order to be successful as a private money lender, mitigating risks is key. You need to evaluate which investments are profitable and which are not. Failure to do this can result in significant loss of capital.
General steps to follow when Getting Started in Real Estate Investing
To get started in real estate investing, follow these general steps:
- Do your research.
- Determine how much money and time you want to spend on a particular type of investment.
- Pick only investment options that fit your financial and risk tolerance profile.
- Be prepared for setbacks.
For those looking to get started in real estate investing, it’s very simple: just do it. The only thing you need to have is the desire to become a real estate entrepreneur. You don’t need any licensing, classes, or education certificates.