Real estate investing is an excellent investment opportunity for those looking for something on a long term basis. More and more people have become involved in real estate investing over recent years, with many relying on this type of investment to fund their retirement rather than relying on pension plans and other types of investments. With the right real estate investment you can make a huge amount of money, as various property magnates have already proven.
However, you do need to start at the bottom and work your way up with real estate investments. If you are a novice investor, you need to do your research and find out more about how this type of investment works and what you need to do. The tips in this guide are designed to help you get a feel for real estate investing so you can determine whether this is the right path for you.
Some real estate investment tips for beginners
There are two main ways in which you can make money from investing in real estate. The first is through appreciation, which is where the value of the property rises. So, you might buy a property at auction, spend some money on getting it up to scratch, and then sell it on at a profit. Even your own home is a real estate investment if you are a homeowner. If and when you decide to sell it, you could make a lot of money on it.
The second means of making money from your real estate investment is by purchasing property to rent out. You can then enjoy a steady stream of rental income from your tenants, which is an ideal long term real estate investment. You can gradually build up a portfolio of rental properties, which means you could be enjoying a sizeable income each month from the rent you receive.
To help you with real estate investment as a beginner, here are some valuable tips:
- Don’t rush in: Real estate is an important investment not something you should rush into on a whim. Think carefully about whether this is the right investment for you. If you decide it is, don’t rush into buying the first property you see. Look at everything from the state of the property and the price to the area it is located in and the likelihood of finding a buyer/renter.
- Network with experienced investors: If you go online, you will find many sites and forums dedicated to property investors. Join some of these and become active on them, as you can then network with seasoned investors. This will enable you to benefit from valuable tips and advice from those already investing.
- Go to property auctions: You can snap up some great deals at property auctions, so make sure you frequent these if you want to purchase an investment property. Whether you are looking to improve and flip the property or whether you want to rent it out for long term income, an auction is a great place to find the perfect property at a knock down price.
- Be prepared to make sacrifices: Before the money starts rolling in from your real estate investment, it needs to go out so that you can make your investment. Therefore, you need to be prepared to make sacrifices so that you have the available funds to invest. This may mean cutting back on luxuries, selling some assets, going with a vacation, and other sacrifices that will provide you with more money to invest.
- Start small: As a novice real estate investor, you need to make sure you don’t try and run before you can walk. It is best to start off small and then work your way up rather than trying to jump in feet first and hope for the best. For instance, if you are looking to invest in a rental property, start off with an apartment in a decent area. This should be easy to let and will enable you to get some experience before you move on to a bigger property.
- Do your research into taxes: When you become a real estate investor, you have to deal with taxes. This is something that is inevitable whether you are investing as a landlord or to sell the property and make a profit. As a beginner, you may find that this is something of a minefield but you don’t want to get on the wrong side of the tax man. So, make sure you do your research into taxes and what you will be liable to pay based on your investment.
- Don’t be tempted to give up your day job right away: Many property investors face an uphill struggle before they start to reap the rewards of their investment. With this in mind, you should avoid giving up your regular job in the hope that you can make up your income right away through your investment. Make sure you give it time and assess what you are actually making in terms of profit and income before you even consider going into it as a full time career.
- Know the risks: You may be aware of the potential benefits of real estate investment, but are you familiar with the risks? Make sure you learn about both the pros and cons of investing in real estate so you are fully aware of potential problems. For example, if you buy a property to rent out, you have to consider the fact that there may be period where you do not have a tenant in place, which means you won’t receive any rental income for that period.
Real estate investing can be extremely lucrative but it can also come with a range of risks. It is important for anyone thinking of investing in real estate to do a lot of research to learn about both the benefits and the risks. You can then make an informed decision with regards to the type of investment you want to make.