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Real Estate Investing for Beginners: Your Guide to Success
If you’re thinking about investing in something other than stocks, bonds, and mutual funds and eyeing the real estate space as a viable, feasible alternative, you aren’t the first one. Of the 19.95 million rental properties in the U.S., about 70 percent are owned by individuals, according to Census data. So, real estate has always been on investors’ minds as a form of investment. Why wouldn’t it be? Land, of any kind, as a potential investment avenue has huge potential. Everyone will need it, always. It could be land for a new factory, a shiny new corporate office, or simply land to build that dream home. Almost nothing compares to that classic route that generally withstands economic downswings—real estate. While land price does, of course, rise and fall, it’s always in the game, always relevant, and always a good long-term investment option. Real estate investing for beginners may seem like you’re ready to take on. But if you’re considering whether it is worth it, it totally is. Here’s why.
Why Invest in Real Estate
1. A Diversified Portfolio
For investors, a diversified portfolio is the thumb rule to manage their investments. Different assets will perform differently, so a diversified portfolio will help improve returns and alleviate risks.
2. A Steady Source of Income
One of the major benefits that beginners in real estate investing can get behind is having a constant source of cash flow. This is particularly true in the case of those who rent out their properties—monthly income (without you having to do anything, really) is a guarantee.
3. A Physical Asset to Call Your Own
This may seem to have a more emotional dimension that speaks to a human desire to have a piece of land to call our own. And there is that, of course. But the added advantage of having a physical asset is that the price may appreciate in the long run. So, you could sell it for a pretty penny in the future.
4. Tax Benefits
When it comes to real estate investing for beginners, you’ll be encouraged to know that tax breaks and benefits are part and parcel of this investment avenue, especially if you’re a renter. You can deduct costs incurred in the course of managing and operating the property.
For a first-timer, though, it can be quite a task to navigate this space without some help. That’s why we’re here—to show you some handy tools and methods for real estate investing for beginners to get started.
Real Estate Investment Avenues
The real estate market in the U.S. grew by a whopping 12.9 percent from 2020 to 2022, and while PwC is expecting that pace to slow down, it’s still cautiously optimistic about the coming year.
The simplest and most obvious way to leverage real estate as a source of passive income is by renting out any property you buy. You’ll earn some money every month like clockwork. All it entails is for you to make sure the space you’ve leased out functions properly. The downside is that it may take time to rent, and you may have to be hands-on when it comes to managing, repair work, etc.
Flipping houses is all about temporary ownership—you buy a house to fix it and sell it at a profit. It’s a fun way to get into real estate if fixing homes is something you enjoy doing. Think construction work, painting, plumbing, etc. Be warned, though: it might take you some time to find a suitable buyer and offload the property.
This relatively new method can be a beneficial form of real estate investing for beginners. It is useful if you want to invest in real estate without owning property outright. The crowdfunding platform matches the investor with real estate properties that they might want to invest in. It is similar to equity investment in that sense. The biggest advantage is that this form of investment doesn’t need a large amount of money at your disposal. In fact, the minimum amount required is $1,000. Some popular real estate crowdfunding sites include Fundrise (good for beginners), Crowdstreet, and RealtyMogul.
Go the REIT Way
A real estate investment trust (REIT) is an easy start to real estate investing for beginners. It’s also quite a popular method of investing. As of 2022, the U.S. had 190 REITs with a market cap of $1.3 trillion. REITs refer to organizations that own a portfolio of real estate assets, such as office buildings, hospitals, resorts, or malls. The good part about investing in REITs is that they are diversified across properties, so the risk is mitigated. You earn a dividend on your shares, and the returns are generally high. There are different types of REITs to choose from.
Or the REIG Way
A real estate investment group (REIG) means you have a company in your investment decisions. In this scenario, a group of private investors come together and buy a physical asset by combining their resources. Every REIG will have its investment strategy—it could be a group decision to rent or flip the property. The crucial thing is that everyone should be on board with the decision. Some REIGs also have fees, so be sure to get all the details you can before committing.
Road Map to Real Estate Investing for Beginners
- Start with studying the local market and understanding what kind of properties are going for what price.
- All your paperwork and documentation absolutely must be in order. Check all your papers, contracts, etc., thoroughly before signing on the dotted line.
- Be clear about your investment objectives and select the kind of property you’d like to invest in. Be sure you visit the site and scout the area yourself.
- Find a mentor in this space to help you navigate the market and recognize opportunities. The chosen person should have experience and demonstrable success in this field to properly guide you. (They should also not charge a high fee!)
- Find your niche and stick with it for some time. Learn how things work in your chosen area of real estate investment. Once you’ve found success there, move into another area of real estate investing.
- Start small. Contrary to popular belief, you don’t have to go all in with a big chunk of your savings. Tread slowly and carefully, then increase your investments once you gain confidence.
- Take advantage of social media platforms to find out everything you can, network with fellow real estate investors, talk to people you trust, and, above all, do your research as well. Only then should you take the plunge.
Emeritus’s Program is a Primer for Real Estate Investing
This is where we add value to your effort. Property markets are less liquid and transparent than the stock market, and sometimes it is difficult to obtain the necessary information to make a fully informed investment decision. Experts teach the six-week Real Estate Investing Strategies program by Columbia Business School in the field. The aim is to explore buying, renting, selling, and managing strategies. It will also teach you how to harness financial tools to assess the feasibility of real estate and mitigate risks. The course best suits fund managers and investors, owners or managers of family funds, and real estate professionals.
Saving money is one thing, but growing it is another thing entirely. This course will show you how real estate counts in your endeavor to grow your funds. There couldn’t be a better motivation to get on board.
By Gauri Kelkar
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