When most people think about real estate investment, all that comes to mind is building a house or owning land. However, there is more to real estate than land and houses. Real estate investment is a great way to diversify your portfolio and build passive income.
Often several people back out of real estate investment because of the lack of money and feelings of inadequacy. However, real estate has evolved so much that you can enter the market with little funds and no prior experience in real estate investment. This guide covers the basics you need to get started in real estate investment.
Is Real Estate Investment Worth it?
This question repeatedly pops up whenever newbies enter the real estate market. It is quite understandable because people want to be sure about the credibility of an investment before putting their funds into it. Real estate investment is worth it because of its numerous benefits. You could catch up with our article about the benefits of investing in real estate. Pending the time you catch up with it, here is a summary of why real estate investment is worth it.
1. Real Estate Serve As an Edge Against Inflation
Real estate investors often get excited whenever inflation occurs. This is because prices of real estate rise whenever there is inflation. Consequently, inflation is usually a season for real estate investors to earn more.
2. Real Estate Allows You to Diversify Your Portfolio
Portfolio diversification is very important for you as an investor. Putting all your eggs in one basket is dangerous and could put you at risk of bankruptcy when an investment fails. When you invest in real estate, there are several branches you could explore. This would give you a great cushioning effect if one of the investments fails or doesn't give the expected ROI.
3. Real Estate Investments Are Prone to Appreciation
Over time, real estate investments always appreciate. Often, their appreciation is not dependent on efforts from you. Once the property is aesthetically appealing and sited in a good environment, the property will appreciate easily.
Getting Started With Real Estate Investment
Getting started with real estate could be intimidating for a newbie. There is a tendency for several thoughts to cross your mind. These thoughts could include a fear of how you would make maximal profit from the investment in no time. In other cases, you might be puzzled about how to start real estate investment.
There are several ways to get started in your real estate investment journey. The most used strategies include Wholesaling, Prehabbing, REIT Investing, Online Real Estate platforms, and Purchasing Rental Properties. Some other persons engage in strategies like Real estate Syndication, House Flipping, and Real Estate Investment Groups.
We are aware that several of these strategies will be new to you. Consequently, we will be expounding on each of these strategies in full.
1. Wholesaling
Real estate wholesaling is one of the easiest ways to enter the real estate market. It is a strategy that allows a real estate investor to serve as a middleman between the buyer and the seller. Wholesalers hardly ever own the property. Rather, they scan for properties at market value and assign a buyer to purchase the contract.
Most of the time, wholesalers hardly ever own the property for which they seek buyers. Rather, they make their own money by adding a fee to the market value for which they are seeking buyers. Having a rich customer base is key to making it big via real estate wholesaling. With a rich customer base, you can easily get properties out of your hand while making money.
Real estate wholesaling is a great choice for beginners because it is not capital-intensive. Additionally, it gives you a chance to build a good network and understand your market area.
2. Prehabbing
A prehab is less capital-intensive than a rehab. Prehab is a real estate investment strategy that requires you to make little touch ups to a property so that the property can be physically appealing to investors. A major step in prehabbing is cleaning. Ensure to remove debris and trash from the apartment are. The cleaning could also involve scrubbing the interior and delicate parts of the property,
Another technique in prehabbing is painting and landscaping. It might be difficult to get investors to visit the interior of a property when the exterior is not aesthetically attractive. At minimal cost, you could get people to paint and tidy the exterior part of a property before getting investors to purchase the property.
Before starting prehabbing, you need to note that not all apartments are suitable for prehabbing. Your first step in prehabbing is to look out for properties with structural integrity. A building with good structural integrity will not require capital intensive touch-ups to be in good condition.
3. REIT Investing
REIT Investing stands for Real Estate Investment Trusts. REIT is a great starting point for people who want to ease into real estate. There are several REIT strategies, but the most common is equity REIT. Equity REIT is a strategy in which investors purchase shares in a company that owns income generating real estate.
REIT is a real estate investment strategy similar to the stock exchange. It is a suitable investment plan for people who cannot fully venture into real estate investment. You could get started in REIT by researching companies that publicly traded REITs. Observe their records and analyze the figures.
Furthermore, conduct a background check on the company's anticipated growth and dividends. Due to the peculiarity of this kind of real estate investment, it is best to speak to a financial counselor before choosing the REIT to invest in.
4. Online Real Estate Platforms
Online real estate platforms are also regarded as crowdfunding platforms. This is an investment strategy that helps link developers with investors. The online real estate platforms strategy requires developers to pitch their idea to developers. The idea is usually backed up by facts, expected ROI, cost of development, and the duration of time before interests begin to roll in.
The agreement is usually a mutually beneficial arrangement. Crowdfunding enables investors to enjoy the benefits of real estate without the burden of ownership and labor. This form of investment could be as risky as embarking on the project yourself.
Plans could flop. Hence, you should conduct thorough research and get the figures straight before investing in crowdfunding platforms.
5. Purchasing Rental Properties.
Who says you have to build to become a landlord? If you are not cut out for the stress of land purchase and following up on construction workers, you could purchase rental properties. Buying a good property in a strategic location is the best way to benefit from buying rental properties.
When you purchase at the right time, it will take a little while before you get back the money you spent purchasing the property. You could make the property an active or passive income as a landlord. If you desire to eliminate the stress of property management, a property manager could help you oversee the day to day running of the property.
Such property managers will stay abreast of the need for repairs and maintenance. They would also serve as the middleman between the tenants and you.
6. Real Estate Syndication
Real estate syndication is a real estate investment strategy that involves the union between real estate investors. The goal of this association is to identify and buy properties. Typically, the agreement occurs between a sponsor and investors.
The sponsor is in charge of sourcing properties for the syndicate. In most cases, the sponsor also serves as the group's property manager. The sponsor contributes time, skill, and value to the syndicate in place of capital.
You may consider starting this real estate investment strategy if funds restrict you. On the other hand, investors play a passive role. Their major task is to fund the capital aspect of the property acquisition. They take care of renovations and bills while receiving their payments through monthly or quarterly ROI.
At the start of the strategy, the timeline and exit strategy for the syndicate is usually spelled out. Once the terms of the agreement are met, the syndicate ends, and the sponsors are paid off for their contribution to the project.
7. House Flipping
House flipping is a real estate investment strategy in which you purchase a house under market value, renovate it, and sell it at a higher price. It is similar to the prehab strategy but is not the same. House flipping is a strategy that is more capital-intensive than prehab. This delicate strategy requires you to be cautious so that you don't end up running at a loss.
Conclusion
Real estate investment is one of the best ways to generate ROI without breaking a sweat. However, several people shy away from it because they need help figuring out how to start. In some other cases, several other people need to be made aware of the numerous strategies for investing in real estate. This guide takes you through some of the ways you could get started in real estate investment.
