So, really, any business starts with the question “Is it right for me?” Only when you have the answer will you be able to take action. After all, why go through the trouble while not knowing if that is exactly what you want to do. As for real estate investing, this question is a must. Therefore, this blog is dedicated to answering this particular question: Is real estate a good investment for beginner investors?
Throughout our experience in real estate investments, we came to one conclusion: Real estate is, indeed, a good investment for novice investors. In fact, real estate investing for beginners is the best way for them to learn how to invest money wisely. Here is why we think so:
#1. Is Real Estate a Good Investment: Easy Entry
What would be better than entering a business that does not require a college education? In fact, real estate investing requires a minimum level of knowledge, in general. So, whether you have a Ph.D., or if you have decided to drop out of school at once, you can still get into property investment.
However, this does not mean that you should not know the basics of the business. Learning terminology, types of properties, investment strategies as well as calculations (which are not as complicated as you might think) is essential. As for the rest (further knowledge and experience), you will learn it as you begin investing and start growing your business. Actually, there are investment strategies that help beginner investors obtain experience faster than other more complex ones in the field. Therefore, as long as you know what it takes to invest, making money in real estate won’t be a problem at all.
#2. Is Real Estate a Good Investment: Buying an Investment Property is Like a Walk in the Park
The process of buying an investment property is not so complicated so long as you know the basics. These include two aspects: the comparative market analysis and the investment property analysis. Here is what they mean:
The Comparative Market Analysis (CMA)
CMA, which is also known as real estate market analysis, is of great significance at this stage. As you begin the process of buying investment properties, picking a location comes first. Therefore, this demands that you analyze the chosen location first. You ask why? Location, along with other factors, is an element of success for any property investment.
So, is real estate a good investment? If you perform CMA, it will be! To learn more about the comparative market analysis process, here are some blogs we recommend you read:
The Investment Property Analysis
This type of real estate property analysis is as important as the CMA. While the CMA deals with the external profitability factors, this one deals with the internal ones. With this type of analysis, you will be able to measure its investment potential. In other words, you can determine whether a certain investment property is worth your time, effort and even money ahead of time.
The investment property analysis tells a real estate investor the property’s performance in terms of the real estate metrics. The one measure that comes at the top of the list is the return on investment. It indicates the amount of money real estate investors will gain in return for what they’ve invested.
Another measure that we think is crucial is the cash flow. Cash flow is the net profit that the property generates at the end of the week, month or even year. It could be positive if your business is doing well, or it could turn out to be negative if your property is underperforming. Obviously, you want a positive cash flow for profitability. So, if you are wondering how to make money from real estate: invest in positive cash flow generating assets.
#3. Is Real Estate a Good Investment: The Choice of Investment Strategies in the Field
As a beginner investor, nothing is better than having the option of choosing what strategy to engage in. Moreover, there are ones that are easy to start with. There are a few strategies we recommend for investing for beginners:
Is Real Estate a Good Investment? Turnkey Properties Are!
This type of investment strategies comes with the least effort requirements making them the best passive income investments. This makes it a great opportunity for investing for beginners. Simply, you purchase a property from a turnkey company that is already renovated, managed, and maybe even has tenants occupying it. The reason we recommend it for beginners is that they won’t need to worry about anything that comes with it. They simply sit back and watch while the property is generating a positive cash flow.
Is Real Estate a Good Investment? Airbnb Rentals Are!
This is the optimal rental strategy that has led many beginner investors to financial independence. The reason is that Airbnb rentals do not require much to begin making money. All you have to have is a vacant room that you want to rent out. The rest is a matter of hospitality and proper management. The only thing you must take into account is the occupancy rate. The higher it is, the better yields. Therefore, here is a guide on sustaining a high occupancy rate for Airbnb rentals for the maximum profit: How Can You Sustain High Airbnb Occupancy Rate for the Most Profitable Rental Property.
Is Real Estate a Good Investment? Wholesaling Real Estate Is!
Besides being a short-term investment strategy, wholesaling is also one of the low-risk investments that are suitable for beginner investors. The process is very simple as well. You find a property priced below market value and assign it to a contract for a period of time. During this time, you, as a wholesaler, should find an end buyer to purchase it at a higher price. Still, make sure the price is lower than the market value of the property. The difference between both prices is what you make as a commission for being the middleman.
What makes wholesaling a great strategy is the ability to invest with almost no capital. When we say that, we are talking about as little as a couple hundred dollars.
To learn more about real estate investing for beginners, check out our blog.