Investing can be a wonderful way to prepare for retirement, increase cash flow, or begin to build generational wealth for your family. If you’re curious about becoming a first-time property investor, you may have a lot of questions. Let’s explore some lucrative tips to empower you to invest in real estate today.
How Do I Get Started?
Investing in real estate doesn’t have to be only for the elites; you don’t have to be rich, you just need to get started. First, you need to decide what kind of property you want to invest in. Residential real estate is most common for first-time investors (apartment buildings, homes, condos, vacation properties), as these are the easiest properties to deal with.
Next, you need to get your finances in order. The recommended amount of money to start with is $50,000 cash for a downpayment and to begin on any repairs needed. If you’re looking to build your wealth and leverage a property investment loan to get started, there are many programs that can coach you through the process and help you build your rental portfolio.
Mentally prepare yourself for the commitment you are about to make. If you aren’t ready to be a landlord or don’t live in the same area as your investment, consider hiring a property manager to handle the day-to-day issues that may arise and field tenant complaints.
Now, let’s explore 3 smart ways to begin your investment journey.
1. Invest Rural
Many investors have the preconceived notion that they must invest in an urban area to be successful, but that simply is not true. When looking at a potential area to invest in, new investors need to ask themselves two questions:
- Are there quality properties available at my price point?
- Is this an up-and-coming area that will attract good tenants?
With these questions in mind, some savvy investors choose to skip the overpriced city and buy property in more rural areas.
Why buy in a rural area? For starters, the price is right. In a rural area, you are more likely to find a cheap, quality property around the $150,000 price point recommended for first-time investors. When you invest in real estate, you’re playing the long game, meaning you won’t see a return on your investment overnight. Buying rural is a great choice because these areas are likely to see gradual development over time, allowing your house to appreciate and your investment to grow along with the area.
Reinvesting is a great term to get acquainted with as a new investor. Reinvesting is when you purchase an investment property elsewhere with the goal of renting it out, while you rent the house you live in. But why would you choose this option if you have the income to buy a house for yourself?
Reinvesting a great option for someone who wants to start investing in an up-and-coming area, but continue living in a big city where a long-term investment may not be as lucrative. Reinvesting also allows you to be flexible on location if you’re not quite ready to commit to a house yet. It’s a great way to build wealth without changing your location or lifestyle.
3. REITs And Crowdfunding
If you’re interested in real estate but not quite ready to take the plunge and buy a property on your own, there are many options to invest your money and see a return for as little as $100.
Investing in a REIT (Real Estate Investment Trust) is not unlike investing in a company’s stock. Rather than buying a property on your own, you are giving a smaller sum of money to a trust that purchases a property, and you’ll get a portion of the return over time as it appreciates. Publicly traded REITs can be bought and sold at any time, and only require a few hundred dollars.
If you are looking for an even more casual way to dip your toes into the real estate pool, consider looking into a crowdfunding platform. These can be similar to REITs, but rather than investing through a corporation, you can pool your money with other investors to get the attention of real estate developers that may be interested in partnering with you.
Gone are the days when property investment was reserved only for the ultra-rich. If you are a successful businessperson who is inspired to increase your wealth by making your first real estate investment, all you have to do is start.
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