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What Every Beginner Should Know About Starting A Real Estate Investment

Investing in real estate is a great way to earn some extra money on the side. Starting a real estate investment, though, can be tough, and beginners often lack the necessary expertise or experience to navigate the many complicated avenues.


Starting a Real Estate Investment for Newbies

The real estate industry poses plenty of lucrative opportunities for anyone with reasonable capital. Fortunately, getting into real estate investments is not as difficult as it may seem. Anyone who has a willingness to learn and a drive to earn can enter the world of real estate. Here are some beginner-friendly ways of starting a real estate investment:


1. Invest in a Rental Property

save money | investing in real estateInvesting in properties and then renting them out is one of the most common approaches to real estate investment. This method allows you to earn regular income in the form of rent.

You can also maximize your profits by charging certain fees and imposing a rent escalation system. Other than that, a lot of related expenses are tax-deductible, too.

Starting real estate investment this way requires a sizable capital, though, depending on where you intend to buy the property. You will also need to cover the cost of any necessary maintenance and repairs.

It is also best to do your research prior to purchasing a property for this purpose. Some neighborhoods do not have a high demand for rentals. When making a decision, make sure you can get a return on your investment with the rent without being unreasonable with the amount you charge.

Additionally, if you lack the time or patience to manage the rental yourself, you will need to hire a property manager to make sure everything goes smoothly. A property manager can also make it easy to find quality tenants through a screening process.

The good news is that property values typically trend upwards. This means you will likely end up with a more valuable property than you start with, allowing you to turn a large profit when you eventually decide to sell.

If investing in a rental property is something that seems too big a step for you, you can start with rooms. If you have an extra room in your current home, you can rent it out to someone. Once you save enough money, you can buy a rental property to lease out, and the cycle continues.


2. Buy and Flip Properties

House flipping is a popular way to get into real estate, especially with the advent of HGTV.

The concept is simple enough: Find and buy a cheap house, renovate it, and then sell it for a profit. Unfortunately, the process of flipping a house itself is not as easy to master and takes more than a knack for interior design.

There are a lot of moving parts involved in house flipping, also known as real estate trading. First of all, you must have sufficient knowledge of the market to confidently say you can get a return on your investment. You need to know how to calculate estimated renovation costs and stay within budget. Otherwise, you end up overspending on refurbishments and have a difficult time selling it for a higher price.

It also takes quite a bit of time to make repairs depending on the condition of the house. A once-hot market can cool down after you complete renovations, and you will wind up with a property nobody wants to buy and a mortgage you must still pay.

Like any problem, though, there is a solution to your house flipping woes. If you decide on this course of real estate investment, make sure you partner with someone who has experience in flipping houses. Look for a contractor who can give you fairly accurate estimates. Consult with a real estate professional to see if a property is worth pursuing.


3. Try Online Real Estate Investing

Investing in real estate does not always equate to the physical. You can just as easily get into the real estate game using just your smartphone through online real estate investing.

You may wonder how it is even possible to invest in real estate without actually seeing a property in person. Online real estate investing works differently than what you are used to. These platforms allow you to connect with real estate developers who need financing. If things go well, you will then receive regular distributions.

There are a couple of downsides to this avenue of real estate investment, though. Like stocks, there is a level of risk involved, and that is on top of the fee the platform collects from you as well. But, unlike stocks, unloading online real estate investments is not easy.

Additionally, a lot of these online platforms only accommodate accredited investors, which means you must have certain requirements to qualify. If you lack the qualifications, though, you can always consider other alternatives like RealtyMogul and Fundrise.


4. Purchase Real Estate Investment Trusts (REITs)

reits | investing in real estateREITs are not the first thing that comes to mind when starting a real estate investment. However, they are a great way to get into real estate on a non-physical degree. So, what are REITs anyway?

Simply put, REITs are companies that own commercial real estate. This can be in the form of hotels, office buildings, condominiums, apartments, and retail spaces. Many investors liken REITs to mutual funds. They typically compensate you generously with dividends, making them an attractive option for many retirees. Furthermore, you have a choice to reinvest whatever you earn back into REITs or diversify your investments.

Beginners will initially find REITs complicated, though. Not all REITs are made equal, with only some traded on a public scale. There are also different types, and the one you choose will define how big a risk is involved. If you want to give REITs a try but have no idea where to start, consider publicly-traded REITs first. You will need a brokerage account to do so, but setting one up only takes a few minutes.


Begin Your Real Estate Journey Today

Starting real estate investment can be daunting since there is always a risk of losing your money. However, there is much to gain from real estate, whether you do it online or offline. All it takes is that first courageous step. Soon enough, you will find yourself well-versed in the field and buying properties left and right.

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