Let’s talk about how to invest in real estate for beginners. Real estate investments are great and often generate an attractive return on investment. Beginners should not be afraid of real estate investment simply because they have heard horror stories from former landlords. Here are five ways a beginner can invest in real estate with little experience and in some cases little money! Here is the real estate investing for beginners guide.
How Beginners Can Invest In Real Estate:
1. Direct Ownership (Buy and Hold)
You buy a piece of real estate and rent it out. The tenant pays for the mortgage, taxes and expenses and if you are lucky there is a surplus left over each month. Once the mortgage is paid off, you own the property free and clear. If you buy a home in a good market, the value of the property will likely appreciate as well.
2. Direct Ownership (Buy and Flip)
These real estate investors buy a piece of real estate for a short term hold. Some flippers make improvements on the property while others buy real estate in hot markets hoping to sell the property for a higher price in the near future.
3. Real Estate Investment Group (REIG)
In this type of real estate investment, a company builds an apartment building or buildings. Then, investors buy one or more units and the company manages the units. In return for managing the units, the company gets a percentage of the rent generated from the tenants.
4. Real Estate Limited Partnership (RELP)
This is basically a REIG with an exit strategy. Real estate investors are financing the construction or renovation of a building. Investors may receive cash payments if the building is generating income but the majority of the money comes when the property is sold. Investors who financed the project collectively share the profits.
5. Real Estate Investment Trust (REIT)
Many beginners invest in a REIT because it is as easy as trading a stock. A REIT is born when a trust is formed and the money from the investors is used to purchase, operate and sell income producing real estate properties. REITs trade on the major stock exchanges and operate similarly to a dividend stock. A REIT must pay 90% of the taxable profits in the form of dividends.
These are five ways you can invest in real estate as a beginner. While there are many ways to invest in real estate, each has its own unique characteristics in terms of risk and liquidity. Make sure you fully understand the real estate investment you are getting into, especially as a beginner! There is no reason for a beginner investor or someone with little money should avoid a real estate investment, just make an informed decision with your money.
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DISCLAIMER: I am not a financial adviser. These videos are for educational purposes only. Investing of any kind involves risk. While it is possible to minimize risk, your investments are solely your responsibility. It is imperative that you conduct your own research. I am merely sharing my opinion with no guarantee of gains or losses on investments.