Have you ever thought about investing in real estate but aren't sure how to do it? There are a variety of ways to do it. Below I give 5 simple ways to get started in investing in real estate.
1. Buy and Hold-
We all have to pay monthly for a place to live. You either pay rent or pay a mortgage.
People invest in real estate by buying a home for themselves. As they live in it and pay it down with their mortgage payment, the property home appreciates in value over time.
Either way you’re making a monthly payment. If your monthly payment goes to a home that you own, you’re investing in an asset.
The home value should increase over time. When you have to sell your home years later, most likely you’ll be able to sell it for more than you bought it for. Therefore making more money.
2. Buy an Investment Property-
You can invest in real estate by becoming a landlord.
The financing for an investment property comes at a higher cost than a home you purchase for occupation. Many times it requires a 20% down payment, which can be expensive for today’s housing prices.
However, if you calculate costs right, it is a great way to invest in real estate.
In this case, you would purchase a home, and then have other people pay rent to use it. It can be a long term rental where tenants live in it on a yearly basis. Or you can do shorter term rental properties like AirBnb or VRBO where tenants stay for vacation purposes and you charge per night.
This way you have the property appreciating in value over time, and other people are making a payment to you, to pay down the mortgage.
3. House Hack- per room/per duplex side-
This is one of the best ways to get started in investing in real estate. It is known as a House Hack.
Basically, you purchase a home, or a multi family (duplex, triplex etc) and you plan to live in one room or unit. This is great because it allows you to get the better financing that’s available to an owner occupant.
Then you charge rent for the other rooms/units. Hopefully if your calculations are correct, the payments to you as the landlord either completely cover your mortgage.
You can then start saving for your next house hack and after two years, you can repeat the process.
4. Quick Flip and Fix it Resell-
Houses that still have the shag carpet and pink toilets will sell, but they will sell for significantly less than an up to date, pristine house of the same size.
If you can calculate the rehab costs correctly, oftentimes you can fix up a property and resell it for higher than your purchase price.
The higher sale price should be able to cover costs for the renovations and give you some extra cash for your wallet.
This method is very time intensive and expensive up front. But you can get a larger return quicker than a buy and hold scenario if played right. 5. Invest in a Real Estate Project or Fund-
Maybe you have some extra cash, but don’t necessarily want to get deep into the landlord/ rehab game. There are options for you as well.
There are Real Estate Funds that are looking for investors that promise returns.
Another option is to find someone you know who is willing to be a landlord or do some rehab but needs some cash. You can bring the cash and they can bring some skills to allow both parties to get into investing in real estate.
In the End
Real estate is a great mode of investing. Just make sure that you run your calculations correctly before you get into investing. Also, make sure that you partner with someone who you can trust. But if done wisely, it is one of the best investments people can make to improve their net worth.
Disclaimer: I am not providing financial advice. Please research every option to the fullest and consult the proper financial professionals before investing. www.biggerpockets.com is a great place to begin to get educated about real estate investing.