How to invest in real estate for beginners

The real estate market has gone through its share of ups-and-downs lately. If you don’t believe us, just check the 2020 data from the National Association of REALTORS®. While experts are hesitant to try to predict the future, signs are pointing to better times.

For those looking to jump into the market, opportunities abound. If learning how to invest in real estate is one of your new year’s resolutions – or you simply want to get a better understanding of how it works – here’s what you need to know.

First things first, a quick recap of where the real estate market has been recently.

The COVID-19 pandemic led to some very low interest rates. Early in the pandemic, predictions were split about whether buyers or sellers would come out ahead. As things settled into “the new normal,” various opportunities emerged for home buyers. Coupled with a need for more space and mass exodus from metropolitan areas, these low rates supported an increase in demand for single-family housing. Conversely, there was waning demand for commercial property, co-living spaces, and rentals in large cities. Together, these factors have lent themselves to more investment opportunities.

Now, let’s dive into real estate investing. What is it, really?

Real estate investing is really everything tied to buying, owning, operating, and selling/renting property in order to make a profit. There are many reasons why someone might choose to invest in real estate. For one, it can be a good way to build equity. For another, the right investment will only appreciate with time. But perhaps most importantly, real estate investments are a great source of revenue. With some practiced real estate investors raking in the likes of seven figures, it’s easy to see how this can provide serious income.

For beginners with questions about how to invest in real estate (in the practical sense), we have answers.

 

Isn’t real estate investing just buying property and renting it out?

Yes, purchasing rental properties is a big one but it’s not the only option. Owning your own home also makes you a real estate investor. Although the return may not be as high as some other options, buying a home and eventually cashing in on that equity makes for a solid investment.

For those who prefer a more hands-off approach, Real Estate Investment Trusts (REITs) may be the answer. REITs do all the work of financing, buying, and running property – all you need to do is purchase their stocks/bonds. As an investor, you’ll get to earn the dividends with none of the labor. Similar low-engagement options include mutual funds and investment groups.

Going further up the spectrum, we have crowdfunding platforms like CrowdStreet or Fundrise. There is still no heavy lifting, as these online platforms are made to be intuitive and beginner friendly.

Now if you really want to get your hands dirty, consider flipping houses or becoming a landlord. People’s housing needs have changed in favor of fewer common spaces, more in-unit amenities, and the ability to carve out at-home office space. This means that renovating property and putting it on the market stands to gain you profits. All you have to do is decide whether you’re looking for a short-term project (house flipping) or a long-term commitment (rental housing).

Can anyone just do it?

The short answer is yes! There are plenty of resources available to help novice investors succeed. Watch YouTube videos on the topic from reputable sources. Read articles from real estate and financial publications like Forbes or the National Real Estate Investor Magazine. Follow some of the experts online and get their experienced real estate investing tips.

How much money do I need to get started?

You don’t need a fortune to get started, as the investment options outlined earlier clearly show. Still, there are certain requirements involved that have nothing to do with money. These will depend on the investment method you choose. For example, a good credit score and the ability to get a loan/mortgage is a must if you plan to buy the property yourself.

Where can I find the right property to invest in?

No matter where you decide to invest, there will be pros and cons to consider. Investing in your own backyard comes with its share of advantages. From knowing the best (and worst) areas, average property rates, and local players, to having a hand in shaping your own community, the perks are significant. That’s not to say that there aren’t major cons to think about.

How long does it take to see a return on investment?

That depends. Some investment options could require you to commit for up to 5 years or more. However, the key here is to give it time and approach real estate investing with a long-term view.
 

Knowing how to invest in real estate takes real time and effort.

Although the future of real estate is far from written, real estate investing has the potential to be a silver lining amid the uncertainty. And there’s no better way to do it than with a local expert like Raboin Realty by your side. We’ve helped people across Fargo-Moorhead find the right property, and we can help you too.

Call us today at (701) 543-2200.