The sub-prime crisis of 2008 dealt a fatal blow to many homeowners and institutions but there is a silver lining.
Over-inflated property prices have settled, creating new opportunities for future home buyers. The market is flooded with foreclosed homes, vacant properties, and unfinished projects.
There will always be value in real estate.
In this article you will learn:
- How to get started in real estate investing
- Types of properties and their return on investment
- Ongoing pros and cons of real estate investing
Roll up your sleeves. We’ve got work to do!
The Basics of How to Get Started in Real Estate Investing
Investment properties often outperform stock investments with an average 9.5% return on residential property versus the average 8.6% one may find through trading stocks, bonds, and funds.
You’re welcome to start with a small property to test the waters. Remember it requires research and allocation of resources regardless of what area you’d like to explore with real estate.
- Determine your budget
- Explore the types of properties (see below)
- Research and practice due diligence with offers
- Watch trends, read reports, and follow authority figures in the markets
- Decide which is the best option and make a move
- Prepare for the worst but hope for the best
Properties fall into two categories: commercial or residential. Either choice takes time and resources to find investors or buyers.
Your motivation will be one aspect — finding capital can be sourced via:
- Creating a list of leads of motivated sellers
- Weighing options with private money lenders
- Working with cash buyers
Once capital is secured, it’s a matter of creating a funnel to drive interested parties and leads to investment properties.
At the heart of this process is developing a great real estate website.
Web sites create a variety of benefits:
- Properties sites can be tweaked and optimized to appear higher in listings
- A professional presence can attract investors
- Create an inbound funnel for real estate investors to sell leads
After having bought (or invested) in a property you are at liberty to increase the price of the property to generate a profit. Other alternatives include repairing and flipping or subletting (such as with AirBnB).
Consider stabilizing the rent until the mortgage is paid in full which provides extra, profitable opportunities.
Here are the types of properties you should know more about when learning how to get started in real estate investing:
Your typical property found on the market. These properties may include apartments, houses, and commercial real estate.
You make a bid, close the deal, and then take on the responsibility for its maintenance and upkeep. You’ll also be responsible for attracting tenants which can be done through Web-based strategies, local listings, advertising, or working with a broker.
Research is key: consider the location of the property, proximity to desired staples of life, amenities, and trends in the market.
Adjust the rent based on a mortgage calculator along with factoring upgrades and repairs along with local job earning averages.
Real Estate Investment Trusts (REITS)
REITS are when investment companies own many pieces of property and offer a part to investors. In a sense — it’s stock investing but with real estate — through mutual or exchange funds.
This type of property investment lowers the financial risk because of the diversification of the portfolio.
Swings in the market may increase profitability but they’re also susceptible to large crashes such as the one experienced in 2008.
Real Estate Investment Groups
This form of real estate investing is like REITS but property ownership is a small group of individuals instead of a large investment company.
The management of the property is done through the group. This reduces the overhead you’d find in a basic rental setup.
The downside is the difficulty in gauging the commitment others may have in these investment properties.
Crowdfunding & Sharing Economy
The explosive growth of the sharing economy has changed real estate investing. The sharing economy for real estate is well-known through services like AirBnB. It gives a home/apartment owner the ability to rent a property on a micro scale without setbacks found with long-term tenants.
Crowdfunding is another opportunity like REITS and investment groups. It uses crowdfunding platforms and a very wide pool of investors to buy, manage, and distribute the wealth of a property.
On Going Demands of Real Estate Investing
It’s common to gloss over the ongoing demands when asking how to get started in real estate investing. Real estate requires upkeep.
There are always problematic issues with real estate:
- Emergency repairs
- Tenant relationship
- Legal liabilities
Those jumping into real estate investing for long-term gains are seeking to keep the property as part of their portfolio. Yet, there will be repairs and maintenance which should be factored into the investment.
Another aspect is the tenant relationship. It can be difficult to judge character. Be aware of tenant rights and be cautious of who you do business with.
Legal liabilities should be an ongoing concern. Failure to do proper maintenance and repairs could harm the tenant which gives them grounds for legal dispute.
Those inexperienced with property management should seek professional guidance and services.
The Reality of Real Estate
Investing in real estate creates a well-rounded, diversified portfolio if it’s paired with investments in stocks, bonds, and funds.
The investment opportunities are lucrative though a drawback could be the time and resources needed to start.
Now you know the basics of how to get started in real estate investing.
Get started now
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