“How do I invest in real estate?” is the first thing you ask yourself if you’re a beginner real estate investor or a first-time real estate investor. Very valid question. Real estate is a huge industry in the US and is one of the most profitable investments you can take on. But it’s also quite a challenging industry, and investing may prove a bit complicated at first. So you how do overcome that? There are several ways to invest in real estate and strategies which are especially helpful if you’re starting out. This article is your Real Estate 101, your crash-blog to real estate investing for beginners. Check out our picks for real estate investment strategies for beginners:
Real Estate Crowdfunding
Real estate crowdfunding is, as the name suggests, funding from the “crowd” or a group of people. Crowdfunding campaigns are a great way to obtain the money necessary for a project. With real estate crowdfunding, investors can raise money using social media for real estate or other websites. Real estate investors use crowdfunding as a way to find investment properties they otherwise would not have access to as you can invest much less than if you were buying an investment property or you can find the funding for one.
Some real estate crowdfunding websites investors use are PeerStreet, Fundrise, and CrowdStreet. Check them out if you’re interested in crowdfunding for real estate.
Airbnb is growing as a service, and so is the potential to invest. With more and more people shifting towards the home-sharing service, so are real estate investors when buying a rental property. Investing in an Airbnb can be very profitable, and sometimes even more profitable than traditional investments such as single-family homes and multi-family homes.
You can first try investing in Airbnb by renting out a single room in your existing property. This is one way to test out whether or not being an Airbnb landlord is a good option for you. After all, Airbnb is no different than other real estate investment strategies; it’s a full-time job.
After your test run, start looking for an investment property that will make you money on Airbnb. To find profitable Airbnb investments, use Mashvisor’s Airbnb Calculator – a tool for real estate investing for beginners that allows you to search for rental properties and calculate values for real estate indicators such as cap rate, CoC return, Airbnb occupancy rate, and expected rental income, making investment property search easier and faster.
Don’t forget to check Airbnb laws for non-owner occupied rentals in your location of choice! Here’s a short list of housing markets where it’s legal (and profitable):
- Atlanta real estate market
- Phoenix real estate market (generally legal in the Arizona real estate market)
- Fort Lauderdale real estate market
- Dallas real estate market
Real Estate Partnerships
Real estate partnerships are one of the best ways to get started in real estate. They’re especially helpful if you don’t have enough money saved up to buy an investment property. But that’s not the only reason to partner with someone in real estate. For example, you could have all the cash you need to invest in a property but lack the experience. That’s why partnerships are a great idea for investing in real estate for beginners. You find a partner, you join your resources, and you invest. And when we say resources, that includes money, management, time, experience, connections, etc.
Real estate partnerships can be a bit tricky though – choose the wrong partner, and you’re in for a proper real estate nightmare. You could end up partnering with someone, only to find out they’re not willing to do enough work or to find out that they can’t fully commit to the investment. So make sure you choose a partner you trust and know you can work with.
Real Estate Investment Trusts
Real Estate Investment Trusts, or REITs, are companies that invest in income-producing real estate such as apartment buildings, office buildings, warehouse spaces, hospitals, shopping centers, hotels, etc. To invest, you can buy shares from a REIT. These are usually listed on major stock exchange markets, just like public stocks. There are several types of REITs including private REITs, mortgage REITs, equity REITs, among others. Make sure to read up on these to find out which option is best for you.
REITs are a great real estate investing for beginners strategy because they allow you to be a shareholder as opposed to investing with full responsibility. So if you think you lack the experience, this is a good place to start in real estate.
Real Estate Wholesaling
If we’re talking real estate investing for beginners, we’re talking real estate wholesaling. Real estate wholesaling is an investment strategy where you’re basically a middleman between a seller and a buyer. To make things simple, the strategy requires you to find investment properties, negotiate their price, get them under contract, and then resell them for a slightly higher price. You’re not flipping the property, you’re not renovating, you’re solely getting it under contract at a discounted price and reselling to buyers for higher. Smart way to make a profit, right?
The only trick is that, when finding property to wholesale, you should aim to get it under contract for lower than the fair market value and sell it for higher than that value. Otherwise, your time wouldn’t be worth the trouble.
Foreclosures are properties that are seized and processed by a lender (usually a bank) when the property owner continuously misses his/her mortgage payments. A foreclosure property is usually sold to secure the loan amount. Foreclosures can also be referred to as a “forced sale.”
Why is investing in foreclosures a good idea? While the foreclosure process is a devastating time for the owner, it’s an opportunity for beginner real estate investors. It’s a great way to find affordable properties at a discounted price and the buying process is faster, with less market competition.
Which Strategy Is Best for Real Estate Investing for Beginners?
There’s no one best strategy in real estate. It all depends on where you are with your real estate experience, finances, and readiness, and what your investment goals are. We’ve listed a few strategies that work well for beginners in real estate, but you should continue to look into each of them to figure out which strategy is ideal for you.
To learn more about how we will help you make faster and smarter real estate investment decisions, click here.