How To Invest in Real Estate: The Beginner’s Guide3 min read
Real estate looks all glittery and lucrative from the outside and has several benefits, but when you actually decide to invest in real estate, the question that first strikes in mind is how to invest in real estate. For most people, real estate and its potential are still a mystery. But once you deep dive, you start to explore the various branches of real estate and if it can be your main stream of income or not.
However, before diving deep, you need to understand how things work in real estate and how you can get them in your favor.
So in this article, we’ll be discussing how you can invest in real estate and make it your primary source of income. And for that, you need to understand what are the top ways you can invest in real estate.
How To Invest in Real Estate: Top 5 Ways
For people who want a consistent stream of income through real estate investing, rental properties are the best way, especially for those who have the D-I-Y (do it yourself) skills and managing skills to deal with the tenants. However, this way requires a substantial amount of investment.
Buy REITs (real estate investment trusts)
This option is ideal for those who wish to own rental real estate without going through the hassles of running it.
A company either builds or buys properties in a typical REIT and then allows individuals to purchase those properties from them. An individual can buy one or multiple properties. However, it’s the company that manages the maintenance of all those properties. And in exchange for the services, the company takes a small percentage of the monthly income. While it’s an excellent idea for people with capital for investment, it can be loss-making at the time of vacancy.
This one is for people who have experience in real estate valuation, marketing, and renovation. House Flipping requires significant capital investment, along with some renovation and repair skills.
Here’s how you do house flipping– you buy an underpriced distressed property, do the required repairs, and some renovate a little for making it look appealing, and at last sell it at a price more than the cost price. However, this isn’t for people who have just started to invest in real estate, as there’s a lot of math required for flipping. You need to calculate all the expenses you’re going to make in the property and then decide on a selling price that covers the cost price, repair expenses, and get you some profit.
Real Estate Wholesaling
In real estate wholesaling, a wholesaler finds a seller who wants to sell a property and then finds an interested buyer. The wholesaler contracts the property with a buyer at a price higher than the seller’s price and keeps the difference as the profit.
This is a fantastic investment idea for newbies who don’t have any capital for investment as this requires almost no investment. All you need to do is find a distressed property, look out for the owner, convince the owner that you can help them sell the property, find a potential buyer, get the deal done and keep the profit. Also, you do it without any prior experience.
Are you still stuck with how to invest in real estate? Weigh the pros and cons of the ways mentioned above and then think about which one would suit you the best. And after some time, once you gather some experience, you can try more than one way and make real estate investment your primary source of income.