You may have heard before that the key to successful real estate investing is maintaining a diverse financial portfolio. Often times this could mean that branching into the world of real estate investments could be the next step in your investing and wealth building adventure.
If you are considering investing in real estate for the first time here are some beginner tips to help get you started
Determine how willing you are to take a risk in real estate investing
If you are already investing in other areas such as stocks then you know all too well that purchasing some stocks are riskier than others. In the same way, investing in real estate can be riskier in some areas. Purchasing a physical property is considered to be somewhat risky because of all of the potential unknowns and ability for things to go wrong.
If you decide to purchase an income property or someone pays you a monthly sum to use it, the property’s probably going to need repairs and maintenance through the years of ownership. These repairs, of course, chip away at your bottom line. It could also be a struggle to find a tenant at some points in time, and an empty property will end up costing money. You could also run into tenants that neglect to pay on time.
Purchasing an income property is not a horrible idea, but there are some more risks to doing so. If you are more of a play it safe type with your investing, you might want to consider an REIT, a real estate investment trust. A real estate investment trust does not require you to actually own a property, instead you will be investing in a company that owns and operates the property. These do carry some risk, but they are minimal as compared to owning your property all on your own. It is always a good idea to do your homework on one of these companies of course before investing in it.
Decide upon how much time you would like to dedicate
Some real estate investments have the option to be hands on such as being a landlord of a property and doing all of the management for it on your own. If you do not have a significant amount of time to dedicate to being a landlord, you could choose to hire a property manager, but this will take money out of your profit.
If you do not have a lot of time, or do not want to invest in a property manager, you could get into investing in someone else’s house flipping adventure or go with the safer REIT investment route.
Related: 5 Real Concerns of Real Estate Investors
Make a plan for your real estate investment window
“Most often when purchasing a stock people have the goal of holding onto them for several years in order to gain the most value and profit from them. It is a good idea to have this same approach with real estate investing. In some cases, some people do choose to go with a shorter-term investment.” Tonya Peek, Frisco TX Realtor®
If you are hoping for a shorter-term investment, house flipping could be worth looking into as it allows you to more quickly turn a profit in real estate.
Consider an Investing Partner
“If you decide to invest in physical properties, it might be less risky or a bit easier to go with a partner when you are starting out. You can pool your resources together, and maybe even find a partner that is already experienced in the game. You may even be able to invest in more lucrative properties this way.” Ellen Bruya, Snohomish Land Agent
You can also split the business costs with your partner, saving some funds that cut away at the bottom line of your real estate investing.
Real estate investing takes time and research before jumping in but this is just a snippet of the amount of tips out there.
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