Want to start investing in real estate?
If you’re like most aspiring real estate investors, it can seem like a daunting and confusing endeavor. With so many different strategies to choose from, how can you know what’s right for you?
The good news is that real estate is one of the best ways to invest money, no matter how you do it. Real estate investors can enjoy passive income streams as well as more active, highly lucrative businesses within the industry. They also reap the benefits of appreciation and long term stability.
The real estate market isn’t going anywhere. While it has its ups and downs, for investors who know how to adapt to temporary changes, there’s always a reward. You’ll never lose if you approach investing in real estate with the right mindset, knowledge, tools, and support.
In this article, we are going to cover 5 different strategies to start real estate investing for beginners, so you can choose the right investment style for you. You’ll learn how to get started in real estate investing with different strategies, and how to build wealth through investing in properties.
Investing 101: How to Create Wealth Investing in Real Estate
When considering how to start investing in real estate, first determine what is important to you. Every investor will tell you what he/she believes the best real estate investments are, but every investor is different. It’s important to understand what you want to get out of investing in properties. This will help you properly align your real estate business with your long term goals and vision.
Traditional Real Estate Investment Strategies
#1. Buy and Hold Rental Properties
One of the most common and beloved real estate investment strategies is buying rental property. This is an especially popular strategy for beginner real estate investors because of its simplicity.
Most people are comfortable with the idea of owning a home, so purchasing an investment property for sale and using it as a rental property is a very attainable step for many first time investors.
The Benefits of Owning Rental Homes:
- Earning a passive monthly cash flow
- Building equity through tenants paying down your mortgage
- Accumulating additional wealth over time through real estate appreciation
Related: Invest in These 10 Cities for Real Estate Appreciation in 2021
The Drawbacks of Owning a Rental House:
- Upkeep and maintenance can be costly and demanding
- Tenants can be a hassle to deal with
The potential downsides to owning rental property are generally not enough to keep people from investing in real estate with this tried and true strategy. Especially if you hire a rental property manager, the occasional tenant issues or the stress of maintenance should not be a very big burden compared with the high return on investment. This is an excellent strategy for people looking to try their hand at investing in real estate for the first time.
The key to investing in successful traditional or Airbnb rental homes is conducting diligent real estate market analysis and rental property analysis before buying. To do this quickly and efficiently, you need access to the best real estate investment tools on the market. You can find all of them on the Mashvisor platform.
#2. Buy and Sell Investment Properties
Another very popular, though slightly more involved, method to invest in real estate is to buy and sell investment property. This is commonly known as flipping homes.
Flipping is a strategy of investing in real estate that requires a much more active presence in your real estate business. You will need to manage and coordinate an entire home renovation, which is why some construction experience may be helpful. It is not required, however, and many real estate investors hire out contractors to manage the renovations for them.
Related: Will the Fix and Flip Strategy Be Profitable in 2021?
The Advantages of Flipping Homes:
- You are able to generate several tens of thousands of dollars in profit within just a few months
- You don’t have to deal with maintaining a property long term
- You don’t have to deal with tenants
- The satisfaction of completing a project and creating a transformation is crucial
The Disadvantages of Flipping Homes:
- Deals can go wrong and become unprofitable or even a money pit if you do not calculate return on investment properly
- Unexpected costs can arise during renovations that may change your return on investment, even if you did your best in calculating it
Overall, flipping a real estate investment can be much riskier than buying and holding, though many first time investors are still able to pull it off profitably. Ask yourself what your risk tolerance is before deciding to buy and sell. And if you do opt for this strategy, make sure you network with people who can lend you advice. Also be sure to invest in the real estate investment analysis tools you need to be successful.
Other Methods of Investing in Real Estate
#3. Microflip Investment Properties
For aspiring flippers who don’t want to get their hands dirty, microflipping can be an excellent way to buy and sell real estate. This method of investing in real estate involves purchasing a property at below market value, marking it up, and quickly reselling it for a profit.
The key is to have a pool of motivated buyers ready to go before purchasing. And you’ll need to purchase property from a motivated seller who is willing to get rid of it immediately, even at a discounted rate. Maintaining a pipeline of prospects is one of the most difficult aspects of microflipping, especially when considering the lightning speed at which transactions take place: typically within days to a week tops.
Microflips are also typically done site unseen, which opens up opportunities for investing in real estate virtually. This means you can microflip properties anywhere in the US housing market from your computer, making it a very attractive option for ambitious investors.
#4. Wholesale Real Estate
To learn all you need to know about real estate wholesaling, watch our video below:
Another method of real estate investing is wholesaling. Unlike flipping or microflipping, wholesalers never actually purchase a property. They simply get it under contract, sell the contract to a buyer, and collect a wholesale fee.
This is an ideal strategy for aspiring investors who do not have enough money or have the means to get a loan to purchase investment property. However, you must do your research and make sure you have a good contract in place. A good contract will include verbiage that protects you and allows you to pull out of the contract in case you do not find a suitable buyer. As long as you protect yourself properly, wholesaling real estate can be a great way to break into real estate investing without having to ever purchase a property.
#5. Invest in REITs
REITs are real estate investment trusts that can be publicly traded and bought into, similar to a stock. They are companies which own and rent real estate, and they pay dividends to shareholders.
If you like the idea of virtual real estate investment, but would prefer a more passive model than microflipping, which requires actively buying and selling property online, buying into a few REITs can be a great way to generate new income streams through real estate.
Related: What Are the Top Real Estate Investment Strategies for Newbies in 2021?
The Takeaway
Whichever method of investing in real estate you choose, make sure you’re prepared with the knowledge and tools you need to succeed as a real estate investor. Mashvisor provides real estate investors with a comprehensive platform for investment property analysis.
- Database of income property for sale, including MLS listings, foreclosures, short sales, bank owned homes, and off market properties
- Real estate heat map for neighborhood analysis
- Rental property calculator for determining return on investment including cash on cash return and cap rate
- Property marketplace for finding off market investment properties
Check out this Mashvisor review to learn more about our products, and how we can help you grow your real estate investment business.
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