Investing in real estate can be a lucrative and rewarding way to build wealth over time. There are several ways to start investing in real estate today, even if you are a beginner. By researching, planning, and seeking guidance from professionals, you can take the first steps toward growing your wealth through real estate investments.
Remember to consider your goals, risk tolerance, and financial situation when deciding on the best approach for you. With the right strategy and mindset, real estate investment can be a profitable and fulfilling journey.
Is Real Estate a Good Investment?
There are several reasons why real estate can be a good investment. Firstly, real estate has historically shown steady appreciation in value over time, making it a relatively safe and stable investment compared to other volatile options like stocks. Additionally, rental income from real estate properties can provide investors with a consistent cash flow, offering a reliable source of passive income.
Moreover, real estate investments offer potential tax benefits, such as deductions for mortgage interest, property taxes, and depreciation. These incentives can help investors optimize their returns and minimize their taxable income.
However, this type of investment does come with some risks, including upkeep, legal issues, and logistical requirements.
Pros of Investing in Real Estate
- Buying below the current market value makes for larger profits
- Investing in real estate can generate a steady and passive income
- Real estate allows you to defer taxes and provides a tax shield for depreciation
- Real estate generally appreciates in value
- Investing in real estate allows you to control your investment and much of the risk
Cons of Investing in Real Estate
- Investing in real estate isn’t an overnight success
- Because of renters and demand, profits may be variable
- Real estate investments require maintenance
- Investments can be impacted by rent control laws by jurisdiction
- Require more of your physical time
- Real estate income is subject to taxation from the first dollar of profit
- Values and rents can decline
- Real estate is not a liquid investment
8 Ways to Start Investing in Real Estate
If you want to know how to invest in real estate, here are eight ways to start your empire.
1. Rent Out a Room
A common way that people get into real estate investment is by renting out a room. Although this activity is recommended only if you own a home or apartment, renting out a room is an easy step toward investing in real estate down the line or reinvesting into your own property. The downfalls of renting out a room can vary depending on the tenant or how much you enjoy your solace, but a background check and solid references may be a good way to earn extra money.
2. Real Estate Crowdfunding
The most accessible entryway to investing in real estate outside your home can come from real estate crowdfunding. Just like crowdfunding in other sectors, real estate crowdfunding allows for smaller amounts of money to be injected into a real estate project by larger numbers of investors who are not necessarily geographically locked or linked to the project.
Crowdfunding is an amazing tool for developers to build more projects with an ever-increasing network of friends, family, followers, and the general public. For investors, this form of real estate investing allows for a larger rental portfolio and a diverse range of investment opportunities. The main crux of real estate crowdfunding is vetting the marketplace you decide to use for this venture.
3. Real Estate Investment Trusts (REITs)
If you don’t have the time or money to invest directly in real estate, you could put money in a real estate investment trust (REIT). A REIT acquires, operates and maintains profit-generating real estate that investors can buy shares of. This form of investing in real estate is so accessible that shares for many REITs can be bought and sold on the stock exchange. Just like classic stocks, dividends are paid by the REIT so that you earn passive income from real estate. REITs that can be traded are known as exchange-traded funds (EFTs), which are pooled investments secured like a mutual fund but specialize in a specific sector or asset type. The difference between ETFs and mutual funds is that ETFs can be bought and sold on the stock exchange as you would any other stock.
4. Short-Term Rental Properties
The short-term, seasonal rental market has existed for hundreds of years, but with the modern introduction of companies like Airbnb and VRBO, generating extra cash on a case-by-case short-term basis is a reality. This form of real estate income isn’t all that passive because you can’t just set it and forget but need to maintain the property and make sure your guests have the amenities they need.
When thinking about short-term rental properties, you should make sure that you have factored in your cleaning, maintenance, toiletries and customer service costs because your business will be dictated by your ratings more than demand.
5. Long-Term Rental Properties
Long-term rentals are another way to invest in real estate. Whether you’re going the classic route of investing in a full property or a condo to rent out as a long-term rental property, a number of things must be in order before you can start making passive rental investment income.
If you’re buying a previously owned or lived-in property or something in foreclosure or auction, you’ll need to do an inspection and a deep clean. An inspection will probably be the start of your secondary expenses. After everything on the initial inspection list is done, you might have to hire contractors for renovation. Once renovated, new appliances and amenities will be needed.
Before you’re open for business, you need to find someone to manage and maintain the property. If you’re handy enough, you can do it yourself, but more than likely you will need to outsource much of this work. Take these expenses into account when budgeting for this kind of real estate investment.
6. Flip Investment Properties
As you might have to renovate a property to have a sustained long-term rental, you could aim for less long-term commitment and flip it for sale. Because the intent of flipping is selling the property as a whole, the amount of work that goes into flipping a property is a bit more aggressive than just a standard renovation for a rental.
7. Land Flipping
Land flipping is a real estate investment strategy where investors purchase undeveloped land with the intention of selling it for a profit in the near future. This form of investing involves buying low, holding onto the property for a short period, and then selling it at a higher price. Land flipping can be a lucrative venture for those who have a keen eye for undervalued properties and know how to market them effectively.
8. Online Real Estate Investing Platforms
If you’d rather browse portfolios and funds from the comfort of your home, online real estate investing or alternative investment platforms offer high-yield real estate within their diverse portfolios. These platforms provide a convenient and accessible way for people to diversify their investment portfolios by investing in real estate without the hassle of traditional property ownership.
Through online real estate investing platforms, individuals can browse and select investment opportunities that suit their preferences, financial goals, and risk tolerance.
Become a Real Estate Investor Today
Now that you know the basics of how to invest in real estate, it’s time to clean out that spare room or find a passive real estate income source that works for your life and budget. Your life as a real estate investor could be just a few clicks (and some vetting) away.
Frequently Asked Questions
How do I become a real estate investor with little money?
Anything from crowdfunded real estate investments to renting out a room in your house are ways to get started in real estate with not much money.
How can I invest $100 in real estate?
Non-accredited investors can invest as little as $10 with real estate crowdfunding options like FundRise.
Can you get rich from real estate investing?
Yes, you could get rich from real estate investing, and many people have done so. However, many real estate investments require a lot of effort and years to see a profit.
