Real estate is one of the fastest and best ways to build wealth, and you don’t actually need to be wealthy to invest in property. As a beginner don’t go into real estate investing unprepared or uneducated. Here are some basics you need to learn, call it Real Estate Investing 101.
Knowledge Is Power
Like any investment, be it stocks or property, the more knowledge you have the better off you are. Every investment requires research and information to make the deal go smoothly and real estate is no different. I was lucky enough to work as a real estate agent before becoming involved in property flipping, I got to earn a living while getting a valuable education. I learned what to look for in a house, how home financing works and I got to work with developers, appraisers and other real estate professionals. It also gave me the chance to build a network of contacts that the average person doesn’t have.
Making Money with Real Estate
Most people assume there is only a couple of ways to make money with real estate, both buying and selling (flipping) or buying and renting. That really isn’t the case. If you’re any part of a real estate deal there is money to be made. You can make money from vacant land, it can be built on or sold as is. If you have a large enough parcel of land it can be broken up and developed into a subdivision.
You can also act as a middle man and profit from it, lease options are another way. Here an investor makes a deal with a seller to rent with the option to buy after a number of years. You can in turn rent the home with the same option only for a shorter time frame. When the tenant exercises the buy option, the seller is paid and the investor is left with a profit. The investor never lives in or uses the property and it gives someone who can’t buy real estate the traditional way a foot hold in the market. That being said this is not for the newbie investor. Get your feet wet with some rental property or a flip before you try this.
This is probably the one method you are most familiar with thanks to the plethora of shows on HGTV on flipping houses. Essentially, flipping breaks down into buying a distressed home preferably in an up and coming neighborhood, fixing it up and then reselling it for a profit. This is usually is done in the shortest time possible. Typically you look for the worst house you can find in the best neighbourhood you can find it in.
Investing in real estate is a great way to build wealth, but start off slowly and learn as much as you can before you sink your first dollar into a real estate deal. You can be tempted to jump in too fast by the availability of financing. Be cautious anyway it will serve you well in the long run.