Choosing to become real estate investors can be a fantastic way to increase passive income, here are five tips to get started.
Investing in real estate takes a plan and skill. While blindly taking your money and randomly investing it in properties just to invest may land you a nice profit, the likelihood of this happening is pretty slim.
Real estate investors know that investing involves a strategy; and if you want to get started investing, you are going to have to have a strategy of your own.
Most investors will suggest that you start small, with REITs or crowdfunding, and then work your way up. It is less risky and helps you build up your portfolio and your capital, too. Jumping head first into flipping houses could leave you feeling overwhelmed – and in over your head.
Keep it simple and build your strategy. It is ok to start small.
Below are 5 ways to get started as real estate investors. Look at your skills, your available funds, and your experience – and decide which option would work best for you.
1. Short Term or Vacation Rentals
The idea of vacation rentals and websites like Airbnb and the like are very popular these days. Those who are traveling find it more enjoyable to stay with a short-term rental or vacation rental than to stay at a hotel. You usually get a more homey feel, more amenities, and a better overall experience.
As you are getting started in real estate investment, you may want to generate some real estate income without having to do any real investing. Or maybe you need to generate the income for investing. If this sounds like you, you could get your feet wet by offering up a room for rent or even listing your property for a vacation rental on certain days of the week or times of the year.
Although this investment model can be very easy and profitable, there are always downsides. For example – there are people who rent Airbnb’s simply for the sole purpose of throwing a huge party that will destroy your home. Using a professional management company for your short term rental can help protect your property.
2. Buy REITs
REITs or real estate investment trusts involve you investing in trusts – not the physical property. REITs are like the mutual funds of real estate because they consist of large companies that own huge pieces of property (think office buildings, hotels, apartment buildings, etc). And they pay dividends.
No, REITs are not the way you are going to get rich on real estate investing, but they are a good place to start for someone just trying to understand what it is all about. In general, publicly-traded REITs can be a sound investment choice.
3. Flipping Properties
If you have spent your Saturday afternoon watching HGTV, then you’ve probably thought, I wonder if I could do that? Show after show has couples buying run-down, forgotten properties and turning them into breathtaking masterpieces. Updated features, flooring, paint, remodeled bathrooms, and kitchens, etc. are all part of transforming a property.
Truth is, flipping properties is not necessarily as easy as it looks on television. First, how good are you at carpentry, plumbing, or electrical work? Do you know someone who is? Or will you have to pay an outside company to handle the work for you? Will you even know if that company is doing a good job, or cutting corners that will cost you later?
Even more, are you able to look at an investment and have a good idea of the costs it will take to renovate the space? And then, of course, you will have to compare all your investment costs with the market rate for re-selling the property. Will you make a profit? Is it a good deal?
Flipping properties involves a lot of strategy and calculations. It can make you a lot of money, but it can also cost you if you don’t know what you are doing.
4. Real Estate Crowdfunding
Real estate crowdfunding is investing in a group of others on either debt or equity. Debt investing means investing in a mortgage loan on a piece of property – then receiving a share of it when it is paid back. Equity investing means investing in the actual property and sharing ownership. You will receive money in however the property generates it.
While it may seem similar to REITs, crowdfunding for real estate investors involves investing in a project of your choosing and the minimum investments are usually higher. Because it is one piece of property, rather than investing in a collection, this type of investment is a little riskier.
5. Invest in Rental Properties
When you first think about investing in rental properties, you likely think about all landlords have to go through — and want to run the other way. But there is a huge difference between being real estate investors and being landlords.
Did you know that you can invest in rental properties, but leave the managing of the property to someone else?
Property managers are experts in handling rental properties. They can do everything from getting a rental property in shape to rent, marketing and advertising the property, tenant screening, lease signing and document management, routine maintenance and emergency repair, rent collection, inspections, monthly accounting documents, and more.
This means that you can focus solely on your investment portfolio while someone else helps you bring in the income by managing your properties. And, if you are new to real estate investing, this may be your safest option to get in the game.
When you are ready to jump into real estate investing you need to have a clear goal of what you are seeking — and how you are going to obtain it.
If investing in rental properties is your go-to method of investing, then Real Property Management Evolve may be able to help. Known as the best management company in the greater Phoenix area, your rental properties will be in good hands.
You can keep honing your investment skills and let Real Property Management Evolve do the rest.
Well, now you know available to start as real estate investors – short-term rentals, REITs, crowdfunding, flipping houses, or rental property investments. Dig deeper into each, reviewing the pros and cons. Then weigh your options with your skill level and determine what your first move should be.
Then, put your real estate investment strategy together. It’s time to do some investing!
“Ninety percent of all millionaires become so through owning real estate.” – Andrew Carnegie