Few investing opportunities offer more rewards than real estate. It’s one of the most diverse investing options available and takes very little experience to get started.
If you’re new to investing in property, there are several key factors to consider before getting started. Take a look at this beginner’s guide to real estate investments.
What is Real Estate Investing?
Real estate investing can involve any activity that allows you to earn money off a property. The property can be anything from raw land to a shopping mall.
Some investors start with the intention of owning property while others simply consult and receive a relatively good profit. Assess where you are financially and your goals for investing in property.
Despite what many infomercials claim, investing in property won’t help you get rich quickly. It is one of the fastest ways to build wealth but that still means putting in years of hard work to learn what works for you.
Here are a few areas of real estate investing to consider based on your profit expectations.
Side Hustle Real Estate Investments
Not everyone wants to quit their day job to become a real estate investor. It’s a great way to bring in extra cash if all you have is a few hours each week to devote to investing.
There are a few ways you can earn part-time income as a real estate investor. You can bird dog, or find properties for other investors.
You receive a finder’s fee for bringing a good deal to the table. These finder’s fees are typically not more than $1,000 but can add a nice supplement to your full-time income.
Another way you can earn money part-time in real estate investments is wholesaling. As a wholesaler, you never actually own the property.
You are placing a home under contract while you find interested investors who want to buy the property for more than your contract is worth. Real estate wholesaling is a popular option for investors who are great at discovering deals.
This option can be part-time in that it won’t take you days of phone calls to discover a deal. You can automate much of the process using direct mail services and email campaigns.
Some wholesalers hire other people to do their cold calling as their business grows. This helps them do more deals in a month making their business scalable.
Wholesaling can bring tens of thousands in profit for part-time work. It’s a riskier form of investing because there’s no guarantee another investor will buy the property.
If they back out last minute, you’ll end up owning the house. Consult with a real estate attorney near me to get help if you’re trapped in a bad deal.
Full-Time Real Estate Investments
Becoming a landlord is the most labor-intensive option when investing in property. Landlords are responsible for the month to month management of a home unless they delegate to a property manager.
Consider the amount of time you have to manage a property or a property manager when deciding to become a landlord. It’s an attractive option if you can find a distressed property and renovate it for profit.
In this case, you have equity built in that reduces your risk as an investor. Another full-time option for investing in property is house flipping.
House flipping can take months to complete. During this time, you’re managing the day to day progress of contractors, inspectors, and permitting to get your house ready for sale.
Delays in the process cost you money. This means you’ll need to be on top of your timeline and fix problems quickly as they arise.
House flipping is the riskiest form of investing for beginners. You need to know how to manage a team, understand what you’re looking for during property walk-throughs, and be able to accurately estimate repair costs before buying a home.
This is easy for seasoned investors to do but beginners can miscalculate a repair and end up upside down on an investment. Choose house flipping if you want the option for big returns on your investment and can stomach the risk.
Have a contingency plan in place for if you end up holding on to the property for longer than you expect.
Net Worth Building Investments
Many investors have heard that the easiest way to build their net worth is through real estate investing. Investing in a multifamily property is one of the best net worth building investments for beginners.
You can start with a fourplex and scale up your investment business right away. As you learn and grow as an investor, you can move on to multifamily properties with more units that bring a higher profit.
The best part about these large dollar investments is that you pay for one building but collect multiple rents. Starting small gives you an idea of what it takes to operate a multifamily unit before taking on a larger, and riskier, opportunity.
Investing in Property as a Developer
Through real estate syndication or crowdfunding, you can invest in larger development projects. One of the most famous real estate syndicates is the Empire State Building.
During the 1960s, private investors pooled together money to get the skyscraper built. Today, there are lots of real estate syndicates in operation looking for new investors to finance projects.
You can get involved with high profile development projects you couldn’t otherwise do on your own if you choose syndication.
What Investment Option Makes Sense for Me?
Investing in property is a major financial step for most people. The key to investing in real estate with no money is to expect to contribute more time.
If you can afford to move slowly and absorb as much information as possible, you’ll eventually gain invaluable skills. These are the skills that bring the biggest profit since you have the knowledge to avoid costly mistakes.
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