Currently, only about 15 percent of Americans invest in real estate.
Two-thirds of Americans are also hesitant to get involved in real estate investment, claiming it’s too expensive, too time-consuming, and too difficult.
If you’re part of this group, you may want to re-think that position.
Real estate investing can definitely be challenging, but it’s not as difficult as many people think. You also don’t have to be a billionaire to get started.
Before you decide that real estate investment isn’t for you, read on for seven great tips on real estate investing for beginners.
1. Is Real Estate Investing Right for You?
When you first start looking into real estate investment, it’s important to ask yourself whether it’s a good investment option for you.
There’s a lot of money to be made in the real estate investing world, but it takes a certain type of person to earn that money.
Listed below are some questions you might want to ask yourself to determine whether real estate investing is a good option for you:
- Are you financially stable (can you weather changes in markets without having your finances severely affected?)
- Is the market favorable to buyers?
- Do you have a reliable real estate agent working with you? Or, can you find one easily?
- Do you have a good credit score?
If you answered “yes” to these questions, you’re probably in a pretty good position to give real estate investing a try.
2. Buy REITs
Did you know that you can invest in real estate without actually owning property?
If you’ve wanted to learn more about the real estate investment world but aren’t particularly interested in owning and managing a property, buying REITs is a good alternative.
REITs (also known as Real Estate Investment Trusts) are similar to mutual funds. When you buy REITs, you invest in companies that own commercial properties like apartment buildings and retail stores.
REITs often pay higher dividends than other investments. You can earn a lot of additional income when you take this approach, and you get to avoid the legwork of fixing up a property to rent or flip.
3. Start Small
No matter what kind of real estate investing you’re planning to do (buying a physical property, buying REITs, etc.), it’s best to start small. This allows you to get your feet wet without taking on too much, too soon.
If you’re buying properties, start with a property that’s easy for you to manage, such as a small single-family home or a duplex.
If you’re buying REITs, start by buying publicly traded REITs through a broker. This will help you ensure you’re investing in reliable companies that are more likely to provide you with a return on your investment.
4. Buy and Hold
There are a lot of different real estate investment strategies out there. The two best options for the majority of investors, though, and the “Buy and Hold” strategy and the “Buy, Renovate, and Hold” strategy.
As the name suggests, the “Buy and Hold” strategy involves buying a property and holding on to it as a rental property. The “Buy, Renovate, and Hold” strategy involves buying a property, fixing it up to increase its value, and then holding on to it as a rental property.
A lot of people do make a decent living buying and flipping houses. Buying and holding is less stressful, though, and it still allows you to earn additional income.
5. Establish a Network
It’s hard to make real estate investing an entirely solo practice. There are a lot of moving parts involved in the process, and it helps to have a network of people working with you to make your goals happen.
At the very least, you ought to have the following people making up your network:
- Real estate agent
- Finance broker
- Property strategist
- Attorney
It’s also a good idea to find someone who can act as your real estate investing mentor. Try to find someone who has a lot of experience in the investment world and is eager to pass their knowledge on to a new investor.
6. Use Caution When Flipping Homes
As you already know, flipping homes can be a lot riskier than buying and holding. That being said, if you’re willing to take on the risk, you can increase your earning potential quite a bit by buying and flipping houses.
When you’re considering flipping houses, it’s best to choose properties that are in reasonably good condition (no serious mechanical issues) and that can be updated and sold quickly. Time is of the essence when you’re flipping houses.
You may also want to discover more about companies that buy houses as-is with the intention of flipping them. Joining up with one of these companies can help you learn more about the process and get help becoming a fix-and-flip expert.
7. Choose the Right Properties
If you’re going to purchase a property to flip or to rent out, it’s important to choose a property that will yield the highest return on your investment.
The following are some questions that will help you determine whether a particular property is a good one for you:
- Is it in a nice or up-and-coming neighborhood?
- Is the home in good condition?
- If it’s not, how much money will it cost to fix the home up?
- What is your anticipated return on investment?
- Can you secure financing for this property?
Consider the answers to each of these questions before you dive in and make a particular property your investment property.
Learn More About Real Estate Investing for Beginners
As you can see, there are a lot of things to keep in mind when you start thinking about investing in real estate.
If you remember these tips on real estate investing for beginners, though, you’ll have a much easier time sorting through information and beginning your investment journey.
Do you want to further your knowledge of real estate and real estate investing? If so, check out the Real Estate section of our site today.
You’ll find all kinds of helpful information here on financing renovations, choosing the best locations for investment properties, and more.
