Since the housing market crashed over a decade ago, real estate investing has become increasingly popular. Many people are looking for ways to make more money, and real estate seems like a logical option. But if you’re new to this world, it can be tough to know where to start. Here are five must-knows for beginners in real estate investing.
Different Types of Real Estate Investments
There are many different types of real estate investments, and it’s essential to know the difference before you start plunking down your hard-earned cash. Here, we tackle five of the most common types of real estate investments.
Rental Properties
You purchase a property, from a single-family home to an apartment complex, usually with the help of a mortgage, and then find tenants to live there. You collect rent each month, and hopefully, the rental income covers the mortgage payment and other expenses associated with owning the property.
Fix and Flip
Another real estate investment strategy is flipping houses. This is where you purchase a property, usually at a low price, and then make repairs or renovations to increase the value. Once the work is done, you sell the property for a profit. This strategy can be riskier and more time-consuming than rental properties, but if done correctly, it can lead to a big payoff.
First Home Investment
Most people started investing in real estate after buying their first home. Your primary residence is considered a real estate investment, and as you make mortgage payments each month, you’re actually building equity in the property. If you eventually sell your home, you could make a profit.
Online Real Estate Platforms
If you don’t have the time or money to invest in a physical property, there are online real estate platforms that allow you to invest in properties without actually owning them. These platforms bundle together multiple properties and then sell shares to investors. This is a more hands-off approach to real estate investing, but it’s still possible to make money this way.
Real Estate Investment Groups (REIGs)
REIGs are groups of investors who pool their money to purchase property. This can be a great way to get started in real estate investing if you don’t have the time or expertise to do it on your own. You can also join an REI club, which is a group of like-minded individuals who meet regularly to discuss real estate investing.
Real Estate Investing Regrets
Even if you do your homework and research the different types of real estate investments, there’s always a chance something could go wrong. Here are some common regrets investors have, so you can avoid making the same mistakes.
Not Doing Enough Research
Many people jump into real estate investing without really knowing what they’re doing. They may have heard that it’s a good way to make money, but they don’t take the time to learn about the different types of investments or the risks involved. As with any type of investment, it’s important to do your homework before putting your hard-earned cash on the line.
Investing Too Much Money
Another regret investors have is investing too much money in one property or deal. It’s important to diversify your investments and not put all your eggs in one basket. This way, if one deal goes sour, you won’t lose everything.
Not Hiring a Professional
Many first-time investors try to go it alone, but this is usually a mistake. There’s a lot of paperwork and legwork involved in real estate investing, and it’s often best to hire a professional, such as a real estate agent or lawyer, to help you navigate the process.
Failing to Plan for the Future
Many people fail to plan for the future when they start investing in real estate. They may not have an Exit strategy mapped out, or they may not think about what they’ll do with the property once they no longer want to own it. It’s important to have a plan for the future, so you know what your options are and can make the best decision for your situation.
Risks in Real Estate Investing
No investment is without risk, and real estate is no different. The following are just a few examples of risks you can face when investing in real estate.
- The market could crash.
- If you’re a landlord, tenants moving out could leave you with a vacant property and no income coming in to cover the mortgage.
- You might not make the profit you expect.
Despite the risks, many people find that real estate investing is a lucrative way to make money. If you’re thinking about getting started, be sure to do your homework and talk to a professional before making any decisions.
The risks of investing in Real Estate are many, but the rewards can be great if you do your research and plan accordingly. With a little bit of knowledge about what to expect before making an investment decision, anyone can make money from real estate investments.
