Getting started with real estate investing can be a daunting proposition for new investors. Like other investments, real estate comes with real risks, but the opportunities for success are great as well. If you’ve seen people invest with success and want to get started, here are three ideas for your first real estate investment.
Fix and Flip
TV shows like Flip or Flop have brought fame and glamor to the world of fix and flips. While the stars of the show commonly make $100,000 or more per property, that is not typical for new investors. However, there is plenty of money to be made if you plan, invest, and execute correctly.
To start, you can save money on transaction costs by saving or raising enough capital to buy houses in cash rather than with a mortgage. If you become a licensed real estate agent, you can also save a lot by taking care of the transaction yourself rather than paying someone else to do it for you.
Once you own a property, you have to do rehab work, which can be very costly. Assembling a team of trusted contractors who will do quality work for a good price can be the difference between profits and losses.
However, keep in mind that fix and flips are very risky. You could invest heavily in a property where you did not do your due diligence and get stuck selling for a loss. Always understand the local neighborhood, comparable sales, and what local buyers want before investing in fix and flips.
Rental properties are purchased for the long-term, and that takes away a lot of the volatility and risk that you get with fix and flips. However, there is still plenty to know before you buy a home or condo to rent out to a tenant.
First, you have to find a property at a great price. If you find one in bad shape, you can get a bargain but have to invest in the property before renters move in. If you buy something move in ready, you can expect to pay more up front.
Once you have the property, finding quality tenants can take a lot of work and a lot of time. Each month the property sits vacant costs you big, but rushing into an agreement with a subpar tenant can cost you even more.
Due to the nature of what you are doing, however, rental properties might be an easier place to start than fix and flips. With a rental, you can buy a property with a mortgage and use the monthly income to pay your mortgage payment and save for future repairs and upgrades. The difference is profit that you can use to save for your next investment… or a nice vacation.
Real Estate Investment Trust
If you do not have the money ready to invest in real estate just yet, but want to get exposure to the real estate market, you can invest through a real estate investment trust, commonly referred to as a REIT.
Buying shares in a REIT is similar to buying a stock on the stock market. The difference is that instead of buying a piece of a company, you are buying a piece of a real estate portfolio. REITs are regulated by the government and are required to pay out the majority of profits as dividends to investors.
You can invest very small dollars in a REIT, starting with less than $100. As your investment grows, you can save up to buy your first rental property or fix and flip. This is a great way to get a taste of real estate before starting on the more difficult and risky world of direct real estate investing.
Find an Agent to Get Started
If you are brand new to real estate investments and want to get started, you can use our real estate agent directory to screen agents in your area. A qualified agent can help you understand and asses properties for their investment potential.
If you are ready to get started, head to AgentHarvest and find your perfect agent today.