Real Estate Investing 101: A Guide for Beginners
Getting started in real estate investing can seem like an overwhelming and sometimes daunting task. But, if done correctly, real estate investing is one of the smartest moves you can make financially. In this post, we will go over some important tips for people getting started in real estate investing.
Types of Real Estate Investments
- Residential Real Estate: This includes apartment buildings, vacation properties, houses, and so forth. Investing in residential real estate is the easiest area to invest in for beginners.
- Commercial Real Estate: This includes office spaces, retail stores, and any other building used for business. This form of real estate investing is a little more expensive than residential real estate and you will likely be responsible for more property. If an apartment complex has four or more units it is considered commercial. If a complex has three or fewer units, it is deemed residential.
- Industrial Real Estate: This includes warehouses, storage units, car washes, and any other large structures that are used for special purposes.
- Land Real Estate: This is an easy way to get your start in real estate investing but it is also the least lucrative form of real estate investing. Land real estate is when you buy undeveloped land and rent it out or wait for the price to appreciate.
How Do You Make Money in Real Estate Investing?
There are three main ways to make some income by real estate investing. Those are collecting rent, selling a property for more than you purchased it for, and collecting interest from loans.
Tips for a Great Start in Real Estate Investing
- Know The Market: You will likely need to use the help and expertise of an experienced real estate agent when first starting to invest in real estate. But, don’t solely rely on them. It’s important that you do your own research and get to know and understand the properties and property values in the area you plan to invest in. Knowing the market or markets will help you choose a target market where you want to get started investing. You may want to choose the area where you live, a vacation area, an area where real estate prices are higher than average or an area with lower than average real estate prices.
- Choose Rental Properties: Rental properties are a great source of passive income and are a great choice when getting started in real estate investing. The easiest option for rental properties is turnkey properties. This means the property is already renovated, has renters, and is ready to go. This is a good choice when just getting your feet wet in real estate investing because it allows you to dive in smoothly. If your rental property needs maintenance, this is where a good property management company can help you get everything looking great and working how it is supposed to.
- Don’t Overwhelm Yourself to Start: We know getting started in real estate investing is an exciting time and the possibilities are endless, but in order to be successful, you want to start small. Try investing in just one property to start. As you get more experienced and used to the day-to-day life and duties of being a rental property owner, you can add on more properties.
- Invest in a Vacation Rental: This is a win-win for you because you’ll have the chance to earn passive income and you will have a spot to vacation! If you choose an investment vacation rental that is far away from where you live, you will definitely need a team of property managers to look after it for you while you are away.
- Find a Mentor: It’s important to find someone that has experience investing in real estate and that you can lean on with any questions and concerns. You can also bounce ideas off of them and you’ll have someone to talk to in the event of difficulties. If you do not know anybody that invests in real estate in your personal life, a property manager can fill this spot for you. Property managers are experienced in real estate investing, dealing with tenants, and any other issues that you may come across.
- Start Flipping Properties: We know you’ve seen the shows on HGTV about house flipping, now is your chance to do it in real life. House flipping consists of investing in an underpriced home or building that’s in need of some TLC. You are responsible for the renovations and bringing the property back to life. Then, you are able to sell the property for a higher price than you paid for it, creating a profit for you.
Types of Real Estate Investing Income
- Real Estate Appreciation: This will happen gradually, so don’t expect to see appreciation immediately or even in the first few years of owning your real estate investment property. When there is a change in the real estate market, your property will often increase in value. This happens frequently when the area where your investment property is booming and grows and becomes a hot spot where a lot of people are looking to live and are willing to pay top dollar.
- Cash Flow: This income comes typically from multi-unit real estate investments. An investor is able to collect a steady stream of cash every month from tenants in the form of rent. This type of income comes from apartment buildings, office buildings, storage units, and retail properties.
- Ancillary Income: This type of income can be huge for a real estate investor. Ancillary income comes from things within your property like vending machines, cash-operated laundry machines, and video games.
We hope this guide to real estate investing for beginners will serve you well as you dive into the exciting world of being a real estate investor. Pal Property Solutions are experts in real estate investing, and we encourage you to please reach out to us if you have any questions about the real estate investing experience.