How to Get Started Investing in Real Estate

If you’re interested in learning about real estate investing, it’s important to know there are multiple types, approaches, strategies, risks, and opportunities. The more you know about these options, the better your chances of success become over the long run.

The Power of Real Estate Investing

Real estate is one of the worst-kept secrets of the wealthy class. Take a random sample size of 100 multi-millionaires in this country and you’ll discover that the majority of them owe some of their wealth to real estate investments. They might not have started with real estate, but at the very least, they’ve used it to grow their net worths. 

The fact that so many successful people turn to real estate isn’t random. Real estate has been a predictable wealth-building tool for many decades. Here are three reasons why:

  • Cash flow. The immediate benefit is cash flow. Depending on the type of investment, how it’s structured, and what sort of financing is used,  it’s possible for a cash investment of just several thousand dollars to generate several hundred dollars per month in cash. There are very few investment vehicles that offer this sort of safe and predictable upside.
  • Tax breaks. The government wants people buying and selling real estate. It’s one of the ways they keep the economy buzzing. As a result, the IRS offers a long list of tax breaks and deductions to investors who play an active role in real estate investing. 
  • Appreciation. Finally, you can’t forget about appreciation. On top of the cash flow and tax breaks that you get year after year, there’s the fact that real estate values almost always increase over the long term. This allows investors to build equity.

These are just the basics. There are so many creative and interesting things you can do with real estate investmenting. Learning how to leverage this investment class will set you apart from your peers.

Simple Ways to Get Started With Real Estate Investing

Depending on the resources you have available and what your goals are for your career and lifestyle, there are different ways to get started in the real estate investing game. Here are several simple options that are suitable for beginners:

1. Partnerships

If you have cash but lack experience, you can always get your feet wet in the world of real estate investing by partnering with professionals who know what they’re doing. You bring your cash to the table and they bring their expertise and connections.

The key to successful investing is to have the right people on your team. For example, there’s a difference between investing in single-family residential real estate, commercial properties, and luxury real estate. If you’re targeting luxury real estate investments, make sure you’re working with a luxury property management company (versus a traditional property manager). The right partnerships help you get your footing in this industry.

2. Fractional Real Estate Investing

Fractional investing has been around for quite some time. It’s the act of investing in a part of a larger investment – a fraction – along with others. Until just recently, it’s never been an option for the average real estate investor. 

However, things are changing. There are now numerous online platforms that make it possible to purchase fractional shares of larger real estate investments with as little as $5,000 down. This opens up a world of new investment opportunities for casual investors who would rather contribute to someone else’s deal than find their own.

3. Wholesaling

If you’re someone who has a pretty big network and/or enjoys sales, you could try your hand at real estate wholesaling as an investment/side hustle.

In wholesaling, you contract a home with a seller for a specific price. Then you go out and find an interested party to purchase the home at an even higher price and keep the difference as profit.

This type of investment typically involves distressed properties and fixer-uppers. Engaging in Wholesale Real Estate transactions requires a keen understanding of market dynamics and strong negotiation skills to ensure profitable deals for all parties involved.

4. REITs

If all of the options listed above sound like they’re a little too risky or time-consuming than you’d like at this stage of your life, don’t worry. There’s still one more way you can get plugged into real estate investing as a beginner. The answer is real estate investment trusts, also known as REITs.

REITs are basically like mutual funds for real estate. But instead of owning a portfolio of stocks, you’re invested in a portfolio of cash-flowing properties (including anything from hospitals and hotels to apartment buildings and offices). As an investor, you buy shares and receive regular dividend payments.

Get Your Feet Wet

Everyone has to start somewhere. Don’t let your lack of experience or familiarity with real estate investing keep you from getting started. With the methods outlined in this article, you don’t need millions of dollars in cash or years of investing experience. Anyone can get started at any time. Why not now?

How to Get Started Investing in Real Estate was last updated October 18th, 2023 by Alex Sanders