Have you ever thought of investing in real estate? Maybe you are looking for a complete change in careers, or maybe you simply need a little money on the side and are looking for an easy solution. The good news is real estate investing is a field that is multi-faceted and may just fit your needs perfectly. Before you can get started investing though, you need to understand what you are up against and the real estate paths available to choose from. In this post, I am going to give you a brief overview of several areas of real estate investing and why they may be what you are looking for.
1. Check Your Finances to Know Your Spending Limits
Before you even begin looking at real estate to invest in, you need to have a firm grasp on your own finances and make sure everything is in order. You need to know what your assets are and how much your liabilities are. By knowing your spending limit, you can estimate how much of a loan you can qualify for if it is needed. I cannot emphasize this point enough, you have to thoroughly know your finances before you consider taking on such a large investment.
2. Research Your Options to Avoid Making a Bad Investment
After you are confident in your finances and have decided to move forward with real estate investing, you will want to begin researching the real estate markets in your area. What are the good areas? What are the bad areas? What areas are just okay?
If you are interested in investing in single or multi-family homes, you should be researching things like the crime rates, school quality, and median home sale prices in the area. If you are interested in investing in commercial properties, you should be researching things like the level of foot and vehicle traffic in the area, as well as crime rates and median sale prices.
3. Finding a Good Support Team for Success
A good support team is vital to success in real estate investing. This is especially true if you are only dabbling in the field and not making this a full-time business endeavor. A fully-staffed support team should consist or a marketing or advertising professional, a property maintenance crew, and a property manager. Depending on your level of involvement with your investment, knowledge, and previous experience, you may be able to fill one or more of these staffing roles.
4. Renting-Out a Spare Room for Extra Cash
For those of you who are just beginning to develop an interest in real estate investing, and who might not be ready to fully commit to practice, renting-out your spare spaces is a great place to start. There is no up-front cost involved and all money received is pure profit.
This has become very popular with a rapidly growing number of homeowners who are just looking for a little bit of easy money on the side. Since the rooms available to rent are usually part of your home, you will want to take extreme caution with who you rent it to. A close friend, family member, or co-worker is usually best.
You might also look into renting out to travelers through Airbnb if you have a good location. The income can be higher than the traditional monthly rent if you have a fully booked calendar.
Compare which one works out best for you and estimate the income you can yield between traditional monthly rent and Airbnb to have a clearer picture.
5. Investing in Single Family Homes
Single family homes are what most people think of when you begin to discuss real estate investing. This has been popularized in recent years due to numerous television shows about the subject. There are also other “real estate investors” who advertise that they are looking for investing partners in your area. They then push their regular training events and guarantee they will teach you all you need to know. In reality, investing in single family homes is one of the biggest risks and has some of the highest up-front costs.
Depending on the property you choose, you may also be required to spend a significant amount of time and money on repairs and updates before you can put it back on the market for a return on your investment. On the flip side, investing in single family homes also has the potential to offer some of the highest short term profits. Lastly, you should always consider the option of keeping the home and renting it to someone. You do not always have to sell it. Renting the property means a slow return on your investment, but it may also mean a larger return over time.
6. Investing in Multi-Family Properties
Investing in multi-family properties is much like investing in single family homes. It is just on a larger scale. There is still the up-front costs and the possible need for repair and updating before you sell or rent the units. The main difference is multi-family properties are more long term investments that single family homes. The reason for this is simple, it will take longer to make the repairs and longer to find buyers or tenants to occupy the units. While they are more long term investments, they can be highly profitable.
Lastly, I would highly recommend a fully staffed support team for this type of investment. It is simply too much for one person.
7. Investing in REIT’s
If you have no idea what an REIT was, let me explain to you. An REIT is a Real Estate Investment Trust. In layman’s terms, a REIT is a for profit company that owns a variety of commercial properties.
So how do you make money by investing in a REIT? The REIT company sells shares just like any other major corporation.
You buy the shares and every so often the company must divide the majority of it’s profits among it’s shareholders. This results in payments being made to you. Other than renting out a room in your home to a friend, this may be the least risky form of real estate investing.
Hopefully, you have seen that real estate investing doesn’t necessarily mean investing large sums of money in hopes of a big return. You don’t need to be scared away by the prospects of failure. You have a variety of options to choose from as you begin your real estate investing journey. Choose the one that works best for you and go for it!