Today, most of the population aims to attain financial freedom as early as possible in their lives. They’re looking for every possible way to make extra income and profit. One way of earning extra income is by investing. Investing means putting money into a venture, such as property or stocks, to earn profits. A popular method of investing is in real estate. This is an ideal venture for individuals who prefer having a tangible asset. As a beginner investor, how do you go about real estate investing? Read on to get tips on the process.
Real estate investing is quite broad. It’d help to learn the basics of real estate and familiarize yourself with its various types. It’s the only way to understand what you’re getting into.
One of the types of real estate investing is REITs. REITs stands for Real Estate Investment Trusts. Here, you’ll buy stocks that are either sold publicly or privately. From this, you’ll get regular dividends at intervals that depend on the company you choose.
The other investment is real estate crowdfunding. In this case, you and several other investors collect funds and invest in property, mainly by buying. Crowdfunding works well if you’re looking to invest in expensive, lucrative real estate property and don’t have the financial capability to do so individually.
Acquiring a rental property is also another type of investment. Here, you’ll build or buy property to rent it out. It can be for commercial or residential purposes, and you’ll earn monthly income from the property as rent.
Last but not least is house flipping. With house flipping, you’ll buy property on sale for an amount often below the market price. You’ll then renovate the property and handle any repairs needed. After which, you’ll re-sell it for a high price, earning profits.
In most cases, real estate investing isn’t a small venture. It often requires a lot of capital to start. Therefore, it’s important to factor in costs as you decide to start investing. Different real estate investing ventures have varying financial needs. There are several cost aspects to look at in this case.
One is the initial cost of acquiring the investment. If you’re buying, this will be the sale price. On the other hand, if you’re building the property from scratch, your initial cost will be the construction cost. The initial is often the highest cost you’ll incur with real estate investing.
The other costs will come about as you utilize the property. These include property tax, insurance, services such as property management, and other expenses.
Once you identify all the costs, including the amount you’ll spend on each, compare this figure with your budget. Ensure your chosen investment is within your budget. You don’t want to strain financially should you spend beyond your budget. Alternatively, if the final figure is too high and you can’t compromise on the venture, seek financing options, such as a loan. While searching for viable solutions, ensure you have a repayment plan.
Like any other industry, the market keeps changing. There are days when business is good, and property owners are making millions from the industry. In contrast, there are times entrepreneurs are barely making sales and profit. You want to invest in a real estate venture that’ll bring you returns in the near future. Therefore, it’s best to study the market beforehand.
Start by going through reports on real estate. Some things to ask are:
With this information, you can gauge whether it’s the right time to start your real estate investing. Your aim of investing should guide you. If you’re looking for short-term returns, invest only when the market is doing well. Suppose you don’t mind long-term returns; you can acquire property when the market isn’t doing good and when prices are low and wait to earn once the market bounces back.
If you’re stuck choosing the right venture, consider looking for real estate gaps in your locality or where you wish to establish your business. If there’s a college that opened up recently, a student hostel or studio apartment would be an ideal real estate venture. You’ll be filling that particular need and taking advantage of the existing resources.
Real estate investing can be very lucrative if you approach it correctly. This article discusses tips that can assist you in mastering real estate investing. Consider implementing these tips, and you’re highly likely to earn high returns from your investment.