Introduction: How to Get into Real Estate and Ways to Invest in Real Estate
Perhaps you have heard the myth of how easy it is to become a real estate investor. The myth claims that all you have to do is purchase some land or a few houses somewhere with potential future high equity, wait for the market to go up, and then sell at the precise moment. Buy low and sell high – that is what every good real estate investor hopes to do.
The problem, of course, is that it’s hard to do. If everyone knew the tricks to how to invest in property, then you wouldn’t hear the nightmare stories of real estate investors getting stuck with a $300,000 mortgage on a house they don’t want to live in and can’t sell.
Learning how to get into real estate as well as the best ways to invest in real estate takes time. Like anything, you have to be willing to study and learn the most effective ways to invest in real estate.
In this brief article, AdvisoryHQ will look at the reasons of why to invest in real estate. We´ll then go on to share the top six ways of how to make money in real estate. If you want to discover the best way to invest in real estate but don’t have a lot of extra cash sitting around, we also look at how to invest in real estate with little money.
Why Invest in Real Estate?
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We live in uncertain economic times, which makes any type of investment potentially dangerous and risky. The fact that millions of people are choosing to invest in gold and silver as a possibly safer investment harbor than more traditional stocks, bonds, and money investments gives testament to our collective doubt regarding our financial future. However, most experts would agree on what real estate investors understand: land tends to hold and increase its value over time.
Sure, the housing market may experience bubbles and rise and fall, and there are places that can lose value, at least temporarily. Nonetheless, people who want to learn how to become a real estate investor understand that, over time, land is one of the safest and surest investments.
Furthermore, as we’ll show below, learning how to invest in property and real estate allows for flexibility and a wide variety of investment options. Discovering how to make money on real estate can help you find ways to make a quick profit through real estate trading or give you the ability to set up a long-term investment for your retirement. There are a number of ways to invest in real estate that can adapt to your personal financial needs, goals, and vision.
Top Six Ways to Learn How to Make Money in Real Estate
Understanding the benefits of why to invest in real estate is relatively easy and apparent. However, the process of discovering how to make money in real estate is much more difficult. Good real estate investors do much more than simply flip through the classified ads in search of that perfect property that will allow them to buy cheap and sell high. The following six tips will set you in the right direction to discovering how to get into real estate and how to make money in real estate.
- How to Invest in Property for Rental
One of the most common ways to invest in real estate is to buy properties that you rent out. It sounds like an easy investment option: you buy a piece of land and build equity while also making money off the monthly rent from your tenants. Who wouldn’t want two separate income flows from one investment?
Unfortunately, it’s not as easy as it sounds. If you don’t do your homework on how to make money in real estate rentals, it’s easy to get stuck with a rental home that no one wants to rent. Without a tenant, you’ll be stuck with a negative cash flow that you’ll have to make up some other way. Furthermore, tenants can damage the property, leading to extra expenses.
Learning how to invest in property for rental requires you to determine where to invest in real estate. Find a place where other rental homes and apartments are fully occupied and where there is a healthy demand for more rentals. Also, ask yourself whether or not you’re up to the task of finding someone to fix the heating unit when it goes out in the middle of the night.
Learning how to make money with real estate rentals doesn’t have to be a difficult process, but it’s not for everyone.
- How to Become a Real Estate Investor with a Focus on Trading
If you’re looking for a quick turnaround on your investment and like the “high risk, high reward” investment environment, then learning how to get into the real estate trading market is the best bet for you.
Investopedia considers that “real estate traders buy properties with the intention of holding them for a short period of time, often no more than three to four months, whereupon they hope to sell them for a profit. This technique is also called flipping properties and is based on buying properties that are either significantly undervalued or are in a very hot market.”
If you feel that you have a good eye for spotting cheap houses or have found the best places to invest in real estate where properties are selling like wildfire, then becoming a real estate trader might be a good short-term investment for you. Discovering where to invest in real estate for trading will require you to watch the numbers, just like investors do on the stock market. You may consider joining a real estate club where other real estate investors might be able to give you some hints on hot markets.
- Leverage Increases Returns for Good Real Estate Investors
Learning how to get into real estate also means that you’ll have to understand how your investment can offer you a good return rate. A good rule of thumb when starting out on how to become a real estate investor is that “leverage increases returns.”
Even if you have to take out a mortgage on a house you’ve found in one of the best places to invest in real estate, you can still make a good return. The Huffington Post gives this example: “Say your property is worth $100,000 and you charge $750 in rent with $500 in mortgage, taxes and fees. You have a $250 profit on $20,000 down. That is $3,000 a year, or a cool 15% return on your deposit. Good luck trying to get an almost guaranteed 15% on stocks.”
- Choose Wisely in Deciding Where to Invest in Real Estate
The old real estate adage that “location matters” is just as true today as it was in the past. Investing in a shoddy property in a low equity neighborhood is probably not going to reap you the healthy financial rewards you were hoping for.
The art of learning how to become a real estate investor is basically in discovering how to identify a high equity area. When looking for where to invest in real estate, it’s important to remember that the neighborhood is more important than the home. A million-dollar home in a rundown neighborhood is never a good investment.
However, good real estate investors also have a knack for discovering areas that have the potential to develop into high equity areas later on. The best places to invest in real estate are not necessarily the places that currently have high equity. They can be prohibitively expensive to get into as well as lacking assurance that they will hold their current high value. An area with inexpensive properties in a potential tourist destination (to name just one example) is a great first-time investment for investors who are wanting to learn how to make money in real estate.
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Look for the Worst House on the Best Street as One of the Best Places to Invest in Real Estate
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A good piece of advice for any real estate investor is to search for the worst house on the best street. You don’t have to be a licensed contractor to learn how to get into real estate and how to identify potential fix-me-up homes. Unless a house is condemned, there is a good chance that it can be restored to a decent-looking, attractive home that will draw a buyer’s attention.
If the current owner has no extra cash to put into repairs and remodeling, there is a good chance that you can get it for cheap. Putting a couple thousand dollars into repairs can go a long way. This is one of the best ways to invest in real estate because a little investment in repairs can drastically add to the value of a home in a lucrative, high equity area.
- Stick to the 1% Rule as the Best Way to Invest in Real Estate
When learning how to get into real estate or where to invest in real estate, the 1% rule should always be followed. According to the website affordanything.com, this rule states the following: “One Percent Rule states that the gross monthly rent should be at least one percent of its final price.”
Learning how to make money in real estate requires any potential real estate investor to understand the importance of this rule when planning to rent out the property he/she buys. If the property you buy costs $150,000 dollars, for example, then you should be able to make $1,500 from rent every month.
The One Percent Rule ensures that if you maintain tenants year round, your property will be paid for in 100 months, or about eight years’ time. After that time, your rent is basically an extra monthly income on top of the growing equity of your real estate property. When searching for how to get into real estate, find properties that obey the 1% rule.
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How to Invest in Real Estate with Little Money
Not all of us have an extra couple hundred thousand dollars to start learning how to make money in real estate. If you’ve already got a mortgage out on the house you live in or if your credit isn’t optimal, the banks may not be open to lending you another $200,000.
Learning how to invest in real estate with little money is another strategy for smaller investors who are looking for how to get into real estate as a potential career or side income.
When learning how to become a real estate investor, it’s important that you look at all the options out there. The majority of people in our society aren’t looking to buy $300,000 homes. While those homes are what every good real estate investor dreams of, not a lot of people are looking to rent those types of homes.
If you want to learn how to get into the real estate rental business, consider buying smaller, less expensive apartments, trailer homes or small homes in places where there are lots of tenants. These properties will cost less up front, but you should find plenty of demand from tenants.
Learning How to Make Money with Real Estate for Long-Term Financial Success
There is no best way to invest in real estate. When searching for how to get into the real estate business, you need to consider your own long-term goals and financial capabilities. Whatever method or approach you decide to take, learning how to make money in real estate has the ability to offer you a steady stream of income far into your financial future.
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