Are you hoping to be wealthy one day? Want to retire comfortably, knowing that you’ll always have an income source?
Investing in real estate is one of the best high yield investment options for achieving these goals. Unlike traditional retirement savings, real estate offers you to build wealth and earn higher returns in a much faster way. Plus, there are so many benefits that include generous tax advantages, the power of leverage, appreciation, and more.
Wondering how to start investing in real estate? It’s not as hard as you think. You don’t need to be rich, nor do you need to make hundreds of thousands of dollars per year. In fact, average people like you and me can get started right now.
So what are the best real estate investing strategies for beginners? And how can you make your first real estate investments a reality? Keep reading to find out now.
Table of Contents
Choose Your Strategy
The first step on your real estate investing journey is getting educated. You need to know what opportunities are available to you as a beginner. You need to choose a single strategy and focus on one thing at a time. Here are the best strategies to use for your first deal.
Buy and Hold
Most investors use the buy and hold strategy to build their wealth and create passive income. When you buy a house, you’ll generally fix it up and rent it out.
The goal is to make a profit each month, called cash flow. This happens when the amount of rent you receive each month covers all associated expenses and then some.
As a long-term investor, you hold the property so it appreciates in value, and collect a profit each month.
Flipping is a hands-on strategy that involves buying distressed or outdated properties for cheap. You then fix it up, either on your own or by paying a contractor and sell it for a profit.
When done right, you can make a full-time income flipping a handful of properties per year. And if you learn to outsource rehab, it can be done somewhat passively.
Short-term rentals are exploding in popularity across the country as people are ditching hotels to rent entire homes. While most people think you need to buy properties near the beach or big cities, that isn’t always true.
Look at any normal town across the country. If it has hotels, it has people looking for short-term rentals.
While you can earn much more per month in rent, it takes a lot more work to manage visitors, clean the property, and so forth.
House hacking is one of the best strategies for brand new investors. This strategy involves you buying a home, typically a duplex or triplex, that you intend to live in. Then you rent out the additional units so that you live for free.
You then get to save a lot of money to fund your next deal, all while living rent and mortgage-free. Plus, since you live in the property, you’ll get a much lower interest rate.
Get Your Finances Ready
Once you know which strategy you plan to use, it’s time to get your finances in order. To do so, you’ll want to make sure your credit score is as high as possible.
You can boost your score in a few months by looking at your report and correcting any errors that are present. Pay off as much consumer debt as you have. This also helps lower your DTI, or debt-to-income ratio, which mortgage lenders require.
Then, just save up as much as you can for a down payment. Take on some part-time work for a few months to stack up the savings.
Find Your First Deal
Once your finances are in order, you can start looking for your first property. Ensuring you get the best real estate deal is a science, an art, and a painfully long process.
There are many strategies when it comes to finding a good deal. One tried and true method is to let all your friends and family know you are looking to buy a property. When they hear that someone plans to sell, they can let you know before it goes up on the MLS.
Once you find a deal that checks out, move quickly. Work with your realtor to buy the property quickly.
Boost Equity Quickly
Even if the home isn’t distressed or outdated, it can help to spruce it up before renting it out. Doing a few cheap, hands-on projects can increase equity right off the bat.
Plus, it can attract higher-quality tenants. Adding some new paint, freshening up the yard, replacing old light fixtures, and other easy, affordable projects can go a long way.
How to Start Investing In Real Estate; Outsource and Multiply
At the beginning of your investing career, you’ll likely do everything yourself. This is a good strategy for a year or two, to learn the ins and outs of the real estate game.
But if you truly want to grow your wealth, you need to think like a savvy investor. That means outsourcing everything.
The first thing you’ll want to do is invest in property management services. Real estate management companies can handle your property, your tenants, repairs, vacancies, and everything else.
This frees up your time so you can focus on finding, funding, and rehabbing new properties, and expanding your portfolio.
Once you have a property manager in place, it helps to start outsourcing your initial remodeling work on new properties. Finding a good contractor that you can trust will allow you to buy better deals (more distressed properties), helping you grow faster and more effectively.
From there, your growth potential is only limited by your imagination.
Taking the First Step
Now that you know how to start investing in real estate, the ball is in your court. It’s up to you to do the hardest thing; take the first step.
Once you get in the game, you’ll probably make some mistakes. But that’s part of the process. It will only serve to make you a more effective investor.
Looking for more helpful articles like this? Be sure to check out the rest of our blog today so you can keep reading and keep learning.