The global real estate market is worth over 228 trillion dollars. That makes real estate the most valuable and popular asset on the planet.
Why is real estate so popular? Because everybody needs a place to live and so long as that’s true, there will always be demand in the market.
Many of the world’s richest people found their wealth through real estate which has inspired would-be investors to hop into property investments rather than staking their money in traditional stocks. If you’re one of those people, the sky is the limit.
But is real estate right for you? And if it is, how can you get started investing in real estate while best assuring your success?
We answer all of those questions and more in this guide on real estate investments.
Are Real Estate Investments Right for You?
When people think of real estate, they think of buying houses and becoming a full-time landlord. While that’s a tried and true real estate investments path, it’s far from being the only path.
There are a number of real estate investment vehicles that you can choose from which offer investors very different experiences. That means that the real estate investment umbrella can cover investors that have widely varying sensibilities.
Therefore, yes. If you’re interested in investing your money and getting stable returns, real estate investments are right for you. It’s just a matter of deciding on which investment vehicle combines the right amount of work/risk.
Is It a Good Time to Enter the Real Estate Market?
When the housing market crashed in 2008 and the United States went into recession, prices for residential properties came tumbling down. While that period of time was undoubtedly was a bad one in American history, once the economy started to rebound and people had money in their pockets again, a silver lining emerged.
Houses were sitting at the lowest prices that they’d been at in years. Seeing that, hundreds of thousands of people hopped into a discounted real estate market and 11-years later are now sitting on historic returns on their investments.
That condensed history of the last decade begs the following question: Have investors today missed the real estate boat?
The answer is, no. There is always a valuable way that you can invest your money in real estate.
If housing is too expensive to buy, commercial property may present a great opportunity. You could also invest in “real estate notes” to collect interest payments off of people paying down their mortgages (more on that later).
It’s always a good time to purchase real estate investments. The market just dictates whichinvestments within real estate are most worth buying.
How Can You Get Started in Real Estate?
Now that you know there’s an opportunity in real estate for every investor at any time, let’s start talking about ways to invest. To be clear, the number of real estate investment opportunities that are out there outnumber the list that we’re going to present you with.
The following 6 strategies cover what seem to be the most popular investment vehicles among modern investors.
1. Fix and Flip
Fixing and flipping real estate investments may be the strategy that you’re most familiar with due to television glamorizing the process.
Fixing and flipping means finding a rundown house that you can get at a bargain, making necessary repairs and reselling at a profit. That formula to success might sound simple but believe us when we say that many people have lost their fortunes on fix and flip ventures.
Managing extensive home repairs is hard. Many times, contractors charge much more than investors are anticipating which disables them from turning a profit. For that reason, we never recommend fix and flips as a first-time investment.
Even as a seasoned investor, you’ll only want to get into fix and flipping if you’re well-versed in contracting work or know a network of high-quality, talented contractors that you can trust.
2. Buy and Rent
Purchasing houses to rent is another popular real estate strategy. It requires that you buy a home, a multi-family dwelling or an apartment complex and have tenants pay you to live there. In theory, if the amount that you’re collecting from a tenant outweighs the amount that you’re paying for mortgage, insurance, property taxes, and maintenance, you’ll be turning a profit.
Being a landlord can be a full-time job. If you prefer to collect rent without dealing with the ins and outs of overseeing tenants, hire a property management company.
3. Buy and Hold
If you purchase a home, hold onto it and it appreciates in value due to market conditions, your investment is producing wealth.
Buying real estate for the purposes of enjoying appreciation is usually just icing on an investor’s cake. Barring extraordinary circumstances, you won’t be able to make significant returns off of buying and holding alone.
4. Invest in a Real Estate Index Fund
The stock market has “index funds” which are buckets that encompass a variety of holdings. For example, if you invested in the “Vanguard 500 fund”, every dollar that you put into the pot would be split up between 500 companies.
In real estate, index funds are called ETFs. By putting your investment dollars into ETFs rather than a single property, you can to own small pieces of multiple properties with other investors and share in the risks/rewards.
5. Purchase Real Estate Notes
When most people buy a residential or commercial property, they pay the bank money each month to keep it. This monthly payment is called a mortgage payment.
What many people don’t know is that the bank has the right to sell their borrower’s debt or “note” to investors. That way, the bank can get paid a lump sum and investors can turn a steady profit by collecting interest that is built into the property owner’s mortgage payments.
6. Lend Hard Money
Rather than buying banknotes as a real estate investments play, you can skip working with banks and just go straight to being a lender. Hard money lending is when people that are cash-rich lend money to other investors who are trying to pull off real estate deals like fix and flips.
As a hard money lender, you’ll be handing out loans that carry high-interest rates and have short terms (which means that borrowers will need to pay you back quickly). In exchange for these lender-friendly stipulations though, you’ll be lending to people that are conducting risky business.
For example, if you lend hard money to a fix and flipper and they don’t turn a profit on their venture, how are they going to pay you?
How to Find Success As a Real Estate Investor
Any one of the real estate strategies that we’ve shared with you has the potential to make you rich. Potential doesn’t ensure a positive outcome though.
How can you best ensure your chances of success in real estate? By keeping the following tips in mind:
Become a Student of the Game
The more that you know about real estate, the better that you’re going to do in the market. It behooves investors to read every book, take every class and attend every reputable seminar that they can on investing to soak up as much information as possible.
Find Your Niche
The most successful real estate players figure out which investment strategy works best for them and they stick with it. Don’t be that person that invests in real estate notes while also hard money lending and renting out property in Pattaya.
Pick one thing and master it.
Get a Mentor
If you can find somebody that you can work with in exchange for learning the real estate ropes, do it. Learning hands-on from a professional can fast forward your career light years ahead.
Understand That Real Estate Investing Presents Risks
Real estate isn’t a get rich quick scheme. It’s a solid investment vehicle that, if leveraged correctly, can net you steady annual returns that outpace the stock market.
Don’t throw money into real estate and expect to get rich. Analyze your investments carefully knowing that a wrong move could cost you your savings.
Start Building a Network
Who you know is directly related to how much you’ll make in real estate so start participating in online forums and hanging out at investors meetings. You never know who you’ll meet and how much value they’ll bring to your venture.
Wrapping Up Our Guide on Real Estate Investments
Real estate investments have proven themselves to be the most reliable builders of wealth on the planet. Now that you know the essentials about investing in property, we hope that you’ll take a deep breath, take the leap and start making money!