Real estate is a popular venture, especially among those new to the realm of investing. On the surface, it seems like an easy route to take; capitalists just need to fulfill regular landlord responsibility.
But, of course, it’s not that simple. Investors have to consider several variables that can impact their ROI. This includes real estate investment trusts (REIT), as well as property type (i.e. commercial, residential, industrial, etc.)
Consider this your guide to Real Estate Investing 101. Before committing to a property, do your research to make sure this is the right opportunity for you.
Types of Real Estate Investment
Here are 7 common types of real estate investments. Understanding their differences can help you decide which option is best for you.
- Residential- Standard landlord/renter terms; renter agrees to pay investor based on a preset rental agreement
- Commercial- Investor is paid by business owners who rent units from a multi-purpose property
- Industrial- Properties are typically used to fulfill the needs of large-scale businesses; think: firms, warehouses, distribution centers
- Real Estate Investment Trust– Investing in shares of corporations who already own property; best for those who aren’t looking to be involved with property management
- Retail- Retail storefronts with several tenants; think: shopping malls, plazas
- Mixed-Use- Can be a combination of residential, commercial, industrial and retail investing (diversification is advantageous in real estate investing)
- Fixed Income- Purchasing an existing property and then lending back to the tenant; best for long-term tenants, such as banks, hotels, etc.
How to Get Involved in Real Estate Investing
One common way new investors acquire property is taking out a mortgage. This allows them to build their property up before leasing out and making more money. Also, it’s a great option for those who can’t afford to pay off the entire property (a.k.a. most).
However, if you’re among the few who can pay off at once, go for it. Once you build up your investment portfolio, it’s much easier to pay upfront.
Putting the mortgage in your name is a real estate investing 101 no-no. Rather, opt for an LLC or limited partnership to hold your investment through. This minimizes your own risk and allows you to protect your assets.
Other Real Estate Investing 101 Tips
Here is some other advice to follow before making a property purchase:
- If able, team up with others you trust. This will help reduce costs and risks associated with lending.
- Don’t make an offer unless you’re ready to follow through.
- Be diligent. Don’t take or make offers unless both parties fully understand the proposed terms.
- Document everything. Written contracts will save you big time if problems arise down the road.
- Don’t be a penny-pincher. This will come back to bite you in the butt, especially if a tenant grows unsatisfied.
Looking for More Info on Real Estate Investing?
It’s not enough to just find a deal and invest. You need a plan-of-action to dictate how you run your investments to garner the most profit.
If you’re looking to enter the world of real estate, you’re in the right place. I educate new investors so they can maximize their ROIs, particularly in the digital landscape.
Contact me today to learn more about investing, as well as best tips and strategies.