Real estate investments have traditionally been one of the more popular options available for beginners. Whether you are investing in a single-family home for yourself or you intend to use it as a rental property, the real estate investments options for beginners is vast.
Some investors see real estate investments a a better move to plan for retirement than investing in other assets such as stocks and shares. Unlike the stock market, investing in real estate means you always have the physical asset to show for your money. To beginners, real estate investments might seem overwhelming, but it doesn’t have to be.
Real Estate For Beginners: Options to consider
There will certainly be a learning curve involved in navigating the real estate market as a beginner, but there are some steps you can take as you get started to minimize those mistakes.
Before you even start considering buying real estate, make sure your credit is as good as it can be. If you need to repair your credit, you may consider a secured credit card.
It can be tempting to jump into a purchase, but you should take your time. As a new real estate investor, you’ll want to really understand market conditions. E.g. how much properties are renting for, how they hold their value for resale, and the locations these properties are in.
You might see several of properties before you decide to buy one. It’s a big decision and commitment, so be sure to take your time.
Know Your Market
Don’t just rely on real estate agents or other investors to know the market that you plan to purchase in. Do your own research and know the values of the properties in that area.
Knowing your market helps ensure that you make good decisions and be successful and you do not overpay for your property.
Start out with just one property or a duplex or multi-unit property that has only a few units. Don’t go for a big property right at the beginning. As you get more experienced, you can buy more real estate and get more involved, but don’t burn out early.
REIT stands for real estate investment trust. Buying into an REIT allows you to invest in real estate without purchasing the physical property. REITs are sort of like mutual funds. You invest in companies which own commercial properties, such as office buildings, apartments, hotels, and retail stores and then you invest in the company.
They often pay high dividends, making them a good choice for investors. If you’re a new investor, it’s best to stick with a publicly traded REITs, which you can purchase through a broker. You can find the most suitable REITs to invest in by searching popular finance sites or reading stock market newsletters.
Consider Rental Properties
Whether you buy a property and rent out your spare room or purchase a property solely with the aim of renting. Rental properties may provide a good source of passive income. They aren’t totally passive though, as you’ll have to provide some maintenance or pay a property manager to handle it all.
Another choice could be buying a turnkey property. Under this investment option, the property is renovated and has renters already in place, so you have to do little, if anything. The first rent payment you receive can then be immediate income you put towards the mortgage.
Consider Flipping Homes
Flipping homes can be lucrative if you know what you’re doing. Purchasing a home for a low price, fixing it up, and then selling it for a profit isn’t as easy or quick as it is sometimes made out to be.
There is more risk involved, as you have to accurately predict renovation costs and sell quickly, to minimize the amount of time you are paying for the home. There’s always the chance that the home doesn’t sell, or takes a long time to sell, too, so keep that in mind.
But, if you have the DIY skills to renovate a home or have a partner who can, flipping homes might be the right move into real estate investing.
Consider A Vacation Rental Home
A vacation rental property serves multiple purposes. It gives you somewhere to stay during your vacations but also provides you with an income to pay for that vacation. You can purchase a vacation home or condo, live in it for part of the year, and rent it out the rest of the year.
The return on investment varies, depending on what type of property it is and where it’s located. The downside of investing in a vacation property is that it may be located away from where you live, so you may need to rely on property managers.
Consider Commercial Real Estate
Commercial real estate investing is typically used by more experienced investors, but not always. It’s usually more expensive than residential real estate, but the upside is that it often generates a higher cash flow.
There are downsides, however, such as empty spaces if a tenant vacates or tenants who are late or don’t pay their rent. Even if the space is vacant, you still have to pay the mortgage.
Commercial properties also often have long leases, so you won’t be able to raise the rent for 5 to 10 years. While this means you might have a stable tenant, it also means you can’t adjust to meet market prices on a regular basis like you can with residential property.
In conclusion Real estate investments for novices do not have to be overwhelming. Start small, do your research, and consider your short-term and long-term goals. Talk to experts and learn more about investing and the market where you wish to buy, and most importantly, engage in due diligence before taking the plunge as a hurried decision may prove to be costly.
This article is for information purposes only.
Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.
There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.