Though real estate can be a bit intimidating for beginners, it may not be really so. Real estate investing for beginners just means more efforts on the part of beginners than the experienced ones, and it is possible for beginners to succeed in real estate.
However, as any real estate investing for beginners involves considerable risks, beginners should start small. Since there are a number of ways to invest in real estate which involve a number of property types such as commercial real estate, homes, apartments and vacation homes, it is recommended that beginners should select the appropriate property type according to their unique financial circumstances.
Real estate investing for beginners
Commercial real estate: This type of real estate investment may be more appropriate for those with deep pockets and experience. It may be appropriate for investors that have a sizeable portfolio and strong financial backup to offset the potential losses incurred due to a fall in real estate prices. One of the upsides of commercial real estate investment is the lease structure in the UK which involves a longer lease duration compared with those in some of the other countries in the world. The long term lease in the UK commercial real estate sector allows for investment stability because most businesses prefer to lease real estate on a long term basis. This is because businesses like to stay at one place for as long as possible since it is good for the stability of the business and strengthens customer confidence in the business as opposed to consistent movements which have a potentially degrading effect on the reputation of a business. Therefore, businesses tend to stay at a place for a while. However, there are options for real estate investing for beginners, as well. A beginner can explore low-risk options at the lower end of the commercial property ladder, to begin with. Real estate investing for beginners may include a shop or an office which involve much less capital compared with large-scale investments such as commercial centres.
Flipping of house is another attractive real estate option for investors which allows investors to profit from buying and selling houses. Although, this may involve high levels of risk, the rewards are equally high if a flipping goes well. Above all, flipping of houses is a great way to earn profits fast but it requires more than just skills for a successful flip. It usually involves buying a house at cheaper prices and selling it out at higher costs before renovating the property. The renovation may involve the required repair and maintenance tasks in order to raise the value of the property. In this type of business, it is crucial to accurately determine the renovation costs as, else, they may significantly cut into the profits. Therefore, flipping of homes is a good option for booking profits over a relatively shorter duration of time, but it should not be the primary consideration in the case of real estate investing for beginners. There is fierce competition in this type of business which attracts seasoned professional investors and builders.
Residential real estate investing for beginners
Residential investment is another option for real estate investing for beginners which may be more viable than other real estate investments as it involves less risk. Though the returns on investment in case of residential real estate may not be as lucrative as that in commercial real estate or house flipping, it may be an ideal option for beginners looking for decent levels of profits as it offers relative stability.
Pre-construction real estate
This type of real estate investment is highly competitive and a very high-risk option, even more than house flipping. As with any real estate investment, high volumes of potential profits come with an equally high level of risk. Investment in this type of real estate involves high levels of skills, experience and expertise in order to accurately predict the right property in the right location. For example, a city which is experiencing a housing crisis or may have a housing crisis in the future, hold immense potential returns on investment. Therefore, this type of investment involves more speculation and the right choice of investment property can reap good profits, while an inappropriate selection of property and location may have serious consequences in term of returns on investment.
These real estate investment types should be considered a viable option for real estate investing for beginners. Multifamily properties may be an entry level investment for beginners before investing in real estate on a larger scale or building a wider real estate portfolio. Many real estate professionals and investors use apartment buildings as the stepping onto the commercial real estate ladder. These property types may involve duplexes, triplexes which may or may not be owner occupied.
Real Estate Investment Trusts or REIT is a relatively less-risk option which may be appropriate for the beginner. This is not a direct investment into a physical property but involves investment in a company which invests in real estate. Such companies own commercial real estate such as office buildings, apartments, hotels and retail stores. These companies usually pay high dividends, making them a good choice for the beginner. For investors new to the real estate sector, a publicly traded REIT may be ideal, which can be purchased through a broker.
Vacation rental homes
These types of real estate investments offer a number of advantages to the investors. One of the primary advantages of this type of investment is its dual purpose as an investment. While a vacation real estate tends to meet the objective of investment for rental purposes, it also doubles up as a vacation home for the owner when the property lies vacant. Owners can purchase a vacation property and rent it out to holidaymakers as well as live at the property. In terms of the levels of occupancy at the property, it depends on the type of property and the location. However, such a property may be located at a distance, and property managers may be need to manage the property.
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.