Investing in real estate is the act of purchasing a piece of land including properties in that land. Anything natural or man-made that is a part of that land, including trees, fences or buildings, is considered real estate.
Investing in real estate can seem expensive at first, but it is one of the most proven ways to build wealth.
Real estate is a rich investment opportunity, with varieties of strategies available to begin making money. Real estate investing is a great way to achieve your financial goals, but it can be tricky to navigate the process as a beginner. If you’ve been looking for a guide on how to invest in real estate, not to worry as we will be offering tips, advice and beginner-friendly strategies.
Below are guides that will aid you through the steps involved in real estate.
1. Wholesaling
One of the ways to get started in real estate is by wholesaling. This involves securing a property below market value and assigning an end buyer to purchase the contract. Real estate wholesaling works much like any other type of wholesaling, the idea is to buy properties low and sell for a profit to another end buyer Wholesalers never own the property and instead make money by adding a fee to the final contract.
What makes wholesaling great for real estate investing for beginners is that it does not require significant capital to get started. While investors may need capital for successful marketing, they will not be actually purchasing properties.
2. Real Estate Syndication
Real estate syndication is a partnership investment whereby several investors pool their money together to purchase or produce real estate properties. Reponsibilities here are split between a sponsor who uses his skills and time to search for potential investments and security the contract, and investors who fund the acquisition and cover any additional costs needed to renovate or repair the property. Investors play more of a passive role, and receive payment over time through monthly or quarterly returns.
The sponsor is in charge of searching for potential investments and securing the contract. They may also be tasked with managing the property. Sponsors typically do not contribute capital to the investment, and instead, add value with skills and time.
Upon the completion of the deal, Sponsors are paid an agreed-upon amount for their work in the deal.
3. Purchasing Rental Properties
Buying a property to rent out is one of the most common investment strategies implemented by most investors, Investing in rental properties can be a great way to secure consistent income as you earn a substantial amount regularly but still own the property.
Investors use the money tenants pay for rent to cover mortgage, maintenance, and repair expenses with the rental income, and still have some money leftover as profit.
4. Real Estate Prehabbing
Another suggestive option for beginning real estate investing is prehabbing a property. Unlike a rehab, which involves funds to make significant improvements, Rehabbing a property is when the buyer or seller spends extra money and puts in excessive physical work to restore, repair or beautiful a property to sell it. At the same time, a “prehap” project requires fewer upgrades to the property to resell it for more than what the investor paid for it. The upgrade is to entice buyers. a prehab project requires only minimal upgrades. Investors will typically enhance a property just enough to entice other investors visually. Rather than making dramatic changes, prehabbing consists of improving a property through sweat equity.
5. REIT Investing
Real estate investment trusts (REITs) are a good start off for real estate beginners. REITs are perfect for beginners who cannot pursue real estate full time because they allow investors who may not be ready or able to purchase properties the chance to benefit from real estate. Although there are variables that can influence the performance of REITs, this investment option is known for offering solid returns with relatively low risk.
REITs allow you to invest in real estate without the physical real estate. Often compared to mutual funds, they’re companies that own commercial real estate such as office buildings, retail spaces, apartments and hotels. REITs tend to pay high dividends, which makes them a common investment in retirement. Investors who don’t need or want the regular income can automatically reinvest those dividends to grow their investment further.
6. Online Real Estate Platforms
Online real estate platforms, also called real estate crowdfunding platforms, help connect borrowers with investors. Developers will post deals and projects that they need financing for, and investors can then finance these projects through debt or equity. This creates a mutually beneficial arrangement; investors can enjoy the benefits of real estate investing without having to deal with ownership or labor. The developers can get the financing they need for projects.
Keep in mind that financing real estate deals can be just as risky and speculative as directly investing in real estate yourself. Always do your homework before you strike a deal. Investors benefit from receiving monthly or quarterly distributions, and they can choose to invest in standalone projects or a portfolio of projects. It’s also a great way to diversify your real estate investments geographically. Potential downsides to using a real estate platform are that the funds can be illiquid with lockup periods, and investors have to pay platform membership fees.
Real estate investment platforms connect real estate developers to investors who want to finance projects, either through debt or equity. Investors hope to receive monthly or quarterly distributions in exchange for taking on a significant amount of risk and paying a fee to the platform. Like many real estate investments, these are speculative and illiquid — you can’t easily unload them the way you can trade a stock.
Many of these platforms are open only to accredited investors, defined by the Securities and Exchange Commission as people who’ve earned income
7. Real Estate Investment Groups (REIG)
A Real Estate Investment Group (REIG) is a business that focuses on investing in real estate. It pools together investor money to buy multi-unit housing and commercial properties. They might even choose to buy, renovate, and sell properties for profit.
REIGs are a little different from Real Estate Investment Trusts (REITs) because their businesses are set up to be more flexible. They may change their investing strategy and leverage various strategies to diversify their sources of capital. REIGs often attract investors who want to enjoy the returns of the real estate market without having to deal with property management responsibilities.