I was 26 when I bought my first house, and people thought I was crazy for doing it, given that it was such an up and coming area. I had no idea how to start real estate investing.
And maybe they were right. But while my home has been a seemingly endless source of stress and heartache, I still feel like I made a good choice investing in real estate. Here's how to get started with your first real estate investment and tips to avoid some of the disasters I encountered.
Real Estate Investing Tips
Do the Necessary Research to Find the Right Investment
When it comes to real estate investing, you should start out by getting an idea of what you want to invest in.
- Are you looking to buy a home for yourself?
- A rental property?
- Or maybe even a whole complex?
This is what most people think of when they are considering real estate investment: the idea is to buy a property and rent it to a tenant, whose rent will cover the cost of the mortgage and any other expenses.
While rental properties are becoming more desirable, keep in mind that being a landlord will essentially become another job. You’ll need to be available for tenants to reach if they have an issue with the property, which you’ll then have to pay for and manage.
On the other hand, Real Estate Investment Groups can offer the financial benefits of owning a property without the hassle of being a landlord. Essentially you can buy one or many units in an apartment complex, for example, and the investment group will manage it and take care of advertising, filling vacancies, and maintenance. While it may be a safer option, know that you’ll be paying extra for the convenience of their management.
Another investment is a real estate investment trust – or REIT. These operate largely like a stock would, except that stock is buying property and paying dividends to you. It’s a solid investment for a regular income stream, but can fluctuate depending on the current housing market.
Shop the Market (Or All of Them!)
Whether it’s a property, investment group, or REIT, you need to do your research.
Real estate is a hot market right now with the economy in recovery, and that means that the more you know, the more you can make and save. When looking for a property to buy, make a checklist of what you would want as a tenant. Does the house or unit fit those qualifications or would you have to renovate and purchase amenities?
The same thing goes for investment groups and REITs. Look for reputable groups that manage properties you would be interested in. If the complex has vacancies, what are they doing to advertise them and get them filled? Keep in mind that you don’t make money from empty units!
When it comes to REITs, look for one that manages properties you can see increasing in value. REITs can be a great supplementary income stream that can fund your retirement or just pay the bills, all while increasing in value.
What Comes Next?
If you think you know what you’re interested in opting into, congrats! Now here comes the hard stuff. Real estate investing can require quite a bit of on-hand cash for purchasing a home or unit, buying stock in a trust, or paying property managers. It might be a good idea to start small and then build your real estate empire from the profits you make.
For example, I had a friend who bought at the bottom of the market and ended up with over $50,000 in equity in their primary home. They then leveraged that equity to buy two more houses and put tenants in those houses. Now they make $1,400 per month in real estate income.
There are tons of stories like this if you can be smart with your money. Many people, like my awesome friend Paula from Afford Anything, have been able to quit their day jobs and be investors and real estate moguls full-time. It can be done!
Speaking of Paula…
I was lucky enough to have Paula come on my web series, Awkward Money Chat, to give some of her tips for how to start real estate investing.
If you haven't investigated her site, Afford Anything, yet, I recommend you should. It's a GOLD MINE of info for how to real estate invest I also like Bigger Pockets (both the site and the podcast are amazing!)
Watch the video below to hear how Paula creates passive income through real estate investing, the creepiest thing one of her tenants has ever done, and how I like my massages.
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