What Is Real Estate Investing?
What exactly is real estate investing, and why are more and more people singing its praises? Real estate investing is, as you might’ve guessed, putting your money into a real estate property and making a profit from it. If you’ve heard of flipping real estate, that’s part of it. Just like investing in the stock market, people who invest in real estate are expecting a return on investment, meaning they will make back the money they put in and eventually make a profit from it.
There are a few different forms of real estate investing, including buying to rent, where you buy a home or condo and rent it to someone else; flipping real estate: where you buy a house that needs work at a low price, fix it up, and resell it for a profit; and buying commercial real estate, where you buy property used for offices or shops and charge businesses rent in exchange for using the location. In this day and age, there are many different forms of real estate investing, so you can choose the method that is best for you.
What are the Benefits of Becoming a Real Estate Investor?
Becoming a real estate investor has many benefits, and as long as you know the risks, you can walk in prepared for success.
Becoming a real estate investor pretty much guarantees you a reliable source of income for the foreseeable future. This is especially true if you choose to invest in a property that you rent out. Renting a home to reliable renters means you will make a predictable amount of money every month, at whatever price you set.
Long Term Security
These days, not everyone stays at the same company for their whole career. As the job market gets more and more unpredictable, it’s likely you’ll bounce from job to job. Having a supplemental income from real estate investing means that you’ll have financial security even if you’re unemployed. That is—until you bite the bullet and make flipping real estate your full-time job!
Appreciation and Inflation
These words will become music to your ears once you begin your investment journey. Appreciation is the natural rise in the value of a house, apartment, piece of land, and so on. Real estate is known for its reliable appreciation—if you hold on to your property long enough, it is sure to rise in value, giving you a great profit when you sell.
The same goes for inflation, which is partly responsible for the rise in the price of your property. Inflation rarely puts a smile on people’s faces… unless they own real estate investments.
Independence comes in many forms once you get started in real estate investing: you can leave your day job and become your own boss, or you can keep your job and retain the sense of freedom that comes from making your own real estate decisions. The choice of what to buy, when to sell, and much more, is left wholly up to you when you are the master of your own investment.
That being said, the most successful real estate investors usually have a partner, a lawyer, or an accountant (or all three!) on their side to help them make the best decisions possible.
Improve and Preserve the Neighborhood
Everyone likes to see a neighborhood improve, especially when it’s done by caring locals instead of outside mega-businesses. Protecting a neighborhood’s culture and unique feel is important, and you can be a part of that when you invest in local properties, restoring them to preserve their structures and facades rather than bulldozing and “re-imagining” them as a shopping center or what-have-you that nobody asked for.
How Do I Start Investing in Real Estate?
So you’ve been convinced that investing in real estate is your next smart move (it is!). Here’s how you get started with real estate investing.
Do Your Research
If you’ve read this article, you probably know more about the investing side of things than before, such as which kind of investment opportunities are out there. It’s time to get to the specifics: we can’t teach you everything. You should research local trends that will impact the value of your property, like the current housing market, the unemployment rate in your city, and the average prices of the neighborhood you’re interested in. Knowing when and where to buy is as important as knowing what kind of property to buy. Flipping real estate will do you no good if you undersell your property.
Make a Plan
Decide how much you want to invest and how involved you can be in your investment. That means deciding which kind of investment is right for you: do you want to rent out your property, fix it up and resell it, or hold onto it for the long haul?
Figure out if you want to team up with a realtor, buy on your own, or contribute to a crowdfund. (A crowdfund is where people put in smaller amounts of money for one property and then share the revenue. It’s a good call if you don’t have a lot of money to invest when you start. If you’re interested, two popular online crowdfunding companies are RealtyMogul and Fundrise.) Knowing exactly how you’d like the investment process to go will help make things go smoothly.
Don’t Forget About Taxes
The money you make from your investments will be part of your tax return, so it’s up to you to figure out which route requires you to pay the least amount of taxes. Different types of properties will have different tax rates. Ideally, you want to find something with low tax rates and simple tax laws. It’s a good idea to ask an accountant with help on this part; unless you enjoy reading up on hours and hours’ worth of tax laws.