Ready to Invest in 2017? A Beginners Guide: How to Invest in Real Estate
By Barbara Friedberg | 12/15/2016, midnight
Investing in real estate is a popular strategy for growing wealth. Adding real estate investments to your portfolio can add diversification and help protect your wealth from the volatility of the stock market.
Check out these real estate investing tips for beginners to discover if you want to own property, buy shares in a real estate investment trust, join a real estate investment group or join the real estate movement through the sharing economy.
HOW TO START INVESTING IN REAL ESTATE
Decide which route you want to take to become a real estate investor. Then, follow these general steps to start investing in real estate:
—Determine how much time and money you want to spend on this type of investment.
—Set your real estate investment budget: $1,000 to $3,000 for fund investors up to five figures for direct real estate investors.
—Do your research. Find out which real estate options and group investment options are available to you.
—Choose the real estate investment option that fits with your financial and time availability. Less time and money is required for REIT investing, whereas greater outlays are required for direct real estate investing.
—Save up a cash cushion, as investment-related expenses will crop up. Direct real estate investors will need a larger cash cushion than hotelier real estate investors.
—Be prepared for setbacks. Like any other financial endeavor, you’re likely to experience challenges. But if you do your homework first, you’ll be prepared.
TYPES OF REAL ESTATE INVESTMENTS
A few options exist for getting started as a real estate investor. Depending on your resources and personal interest, you can find the beginner investing choice that best suits your financial strategy. Here are four of the most accessible types of real estate investing:
To become a direct owner in real estate, find a home, condo or apartment building, buy it and then rent it out. Before becoming a landlord, you’ll need a down payment, property inspections and to review the property’s rental potential and expense records.
Benefits of real estate investing include the opportunity for steady cash flows and capital appreciation, along with tax benefits. However, it takes due diligence to uncover a suitable rental property selling at the right price. And, a key lesson in Real Estate Investing 101 is this: The rental property’s expenses — repairs, maintenance, etc. — shouldn’t be greater than your rental income, or you’ll be losing money instead of making it.
If you have the down payment, time and motivation for direct real-estate investing, find a real estate agent who deals in rental properties and start viewing properties. Be prepared to evaluate the property’s financial records. Do the math to ensure your rental property will provide a good return on your investment.
REAL ESTATE INVESTMENT TRUSTS
Real estate investment trusts, or REITs, are real estate investment companies that own or finance income-producing real estate. REITs buy many properties — including apartments, hospitals, hotels, industrial facilities, office buildings and mortgages — and then sell ownership shares to individual investors.