5 Effective Ways to Start Investing in Real Estate

“Don’t wait to buy real estate; buy real estate and wait.”

Most people know real estate can make big money. But there are lots of ways to do it, not just one.

Lots of people want to start investing but aren't sure where or how to begin.

One of the old ways is buying a property to rent out. But being a landlord isn't always fun. Dealing with bugs and broken toilets isn't glamorous.

But if you do it right, investing in real estate can make you a lot of money. It can also spread out your investments and give you money without working all the time. And you don't always have to be there for every little problem with the property.

Understanding Investment Goals

Before you jump into real estate investing, it's important to know a few things. You should understand how the market works, look into different ways to invest, learn about how to get money, and know about the risks. Luckily, there are lots of resources available to help you, like books, online classes, podcasts, and meetings with experts. Also, talking to experienced investors or getting advice from a real estate agent can give you some really helpful tips.

It's really important to figure out what you want from your investment. Do you want to make money by renting out properties for a long time, or do you want to buy and sell quickly for a profit? Knowing your goals will help you decide how to invest and what kind of properties to look for.

Financial Readiness

Investing in real estate often requires a lot of money. You should check if you have enough money saved up and think about how you can get more, like getting loans or finding partners to invest with. It's also important to understand things like your credit score, how much money you have saved, and the risks involved in using your money to invest.

Here are some of the best ways to make money in real estate:

Consider REITs (Real Estate Investment Trusts)

Are REITs worth investing in? They might be, but they come with various complexities. While some trade on an exchange similar to stocks, others don't. The type of REIT you choose can greatly affect the level of risk you're exposed to. Non-traded REITs, for instance, can be challenging to sell and value accurately.

REITs offer a way to invest in real estate without directly owning property. Often likened to mutual funds, these are companies that own different kinds of commercial real estate like offices, stores, apartments, and hotels. They often pay out high dividends, which makes them popular for retirement savings. If you don't need the dividends for regular income, you can reinvest them to grow your investment even more.

You can broaden your real estate investment portfolio by buying into a fund that holds shares in multiple REITs. This can be done through a real estate ETF or by investing in a mutual fund with various REIT holdings.

To do this, you'll need a brokerage account, which you can open in less than 15 minutes. Many companies don't require an initial investment, although the REIT itself might have a minimum investment requirement.

For beginners, it's generally recommended to stick with publicly traded REITs, which can be purchased through brokerage firms.

Starting Out as a Landlord

Becoming a landlord is a common way for many people to start their real estate business. When you own a property and rent it out, you can make money in two main ways:

You get a steady income from the monthly rent payments. As you use this money to pay off the property and adjust rents based on market trends, your profit increases each year.

Over time, the value of your property goes up, which means you can sell it for more than you bought it for. You can also use the money you've made to pay for repairs, upgrades, and to buy more properties.

Being a landlord gives you both regular income and a valuable investment. It also lets you build a portfolio of properties that you can pass down to your family with fewer taxes.

While some landlords work from home, others choose to set up an office for their rental business.

To grow your landlord business, you can start by moving from owning one-family homes to owning buildings with multiple apartments. This can lower your expenses and increase your profits.

Making Money by Flipping Properties

Flipping properties, which has become well-known through popular TV shows, involves buying run-down homes, fixing them up, and then selling them for more money. It's a way to make a profit in real estate.

To flip a property, you need to find homes that need fixing but have potential. You also need to understand how much it will cost to fix them up and know what buyers are looking for. While flipping houses can make you a lot of money, it's also a lot of work and can be risky.

Unlike renting out properties, flipping doesn't give you money every month. Instead, you make money all at once when you sell the house.

Some people do a few flips each year to make extra cash, while others make flipping houses their main business. You can even do it from home if you want.

It's important to keep costs low when flipping houses. The longer you own a property, the more money you spend on things like the mortgage, taxes, and utilities. So, it's crucial to work quickly and efficiently to get the property ready to sell.

Another way to make more money from flipping is to be smart about the improvements you make. You want to spend money on things that will make the house worth more to buyers, not just things that look nice. Remember, you're not designing the house for yourself; you're designing it to sell to someone else.

Try Property Management

Many people think you have to own property to make money from it. If you're interested in real estate but don't want to buy property, consider property management.

Property managers take care of maintenance, repairs, and sometimes collecting rent for property owners. They get paid a fee, usually a percentage of the rent. You'll also need to find new tenants to keep the properties rented.

Starting a property management business can be a full-time job. While you could work from home, having a dedicated office makes things easier. You'll need space for storing supplies like paint, cleaning materials, and tools. You might also need to hire helpers for tasks like lawn care, plumbing, and painting.

You need to be available for emergencies at the properties you manage, like storm damage or urgent repairs. If you can't be there, you'll need a backup plan.

Becoming a Real Estate Agent

Being a real estate agent has been a popular choice in the real estate world for a long time. While some newer ways of doing business, like bird-dogging and flipping, are gaining attention, being an agent requires formal education and certification from the state.

Starting out as a real estate agent can be tough financially because you don't get paid until the property sale closes. This means you have to pay for all the marketing expenses upfront, such as photos, signs, open houses, and mailings. You only get your commission when the house sells. Real estate agents need to be resilient because choosing this career is a long-term game.

But this is also a rewarding and fulfilling career. It can be very profitable, especially if you become an expert in a specific area. As you learn and grow, you'll find more success. Having good people skills is important for growing your business, after all, this is a sales job. Many successful agents are known for being friendly and easy to talk to. Remember, people will do business if they know, like and trust you.