A Beginners Guide to Real Estate Investments

Photo by cottonbro from Pexels

Real estate is any piece of property or land. Real estate investing is purchasing real estate. Anything on land, be it natural or man-made, such as fences, trees, or buildings, is defined as real estate.

What Is Real Estate Investing?

Real estate investing is purchasing real estate. It is the act of purchasing land plus any additions to the land created by humans. Real estate investing can be divided into several categories.

The most popular categories are industrial, residential, and commercial real estate investing. Investing in real estate can seem expensive at first, but history has proven that it is a solid way to build wealth.

How Do You Make Money from Real Estate Investing?

The two primary ways that you make money from real estate are through value appreciation and income from renters.

Rental Income

You can rent out a property that you own. You make money from the rent you receive and from the appreciating value of your property. The level of your involvement in managing the property is up to you.

Some investors turn to DST properties for sale when looking for passive income streams. This allows them to avoid actively being involved in real estate positions and avoid day-to-day things like managing tenants and doing maintenance. As beneficiaries, they do not have the same responsibilities as landlords. This means that they get the benefit of being passive investors without having management responsibility.

The ideal situation would be where your renters are paying for your mortgage and you can walk away with a little bit of profit. Once the mortgage is paid off, your profit margin skyrockets.

Factor in repairs and maintenance for your budget. This will influence how much you charge for rent.

Value Appreciation

Throughout history, property values have continued to increase. This is called appreciation.

Your properties are going to appreciate based on where they are located. Property values rise based on how desirable people think the neighborhood is. That is why many in real estate will say that the goal is to purchase the worst-looking home in the best neighborhood.

It is better to purchase a rundown home in a nice neighborhood and then fix it up as opposed to purchasing a nice home in a rundown neighborhood. Look to the future when it comes to appreciation. Try to identify the up-and-coming areas.

Real Estate Wholesaling

Wholesaling is one of the fastest ways to start investing in real estate. You secure property that is under market value and then choose an end buyer to purchase the contract. As a whole seller, you don’t own the property. You make money by adding an additional fee to the contract.

Real Estate Prehabbing

This is an investment option that involves enhancing a property just enough so that other investors will want to purchase it. You might take the time to clean a property, paint it, and do some minimal landscaping. The goal is to make others want to purchase the property and do the actual remodeling to make it ready to sell.

Rental Properties

Rental properties are a great way to get a fixed monthly income. Being a landlord does entail responsibility. However, if you purchase the right property at the right time, the rent money you receive may cover your mortgage, repairs, and even offer a little income.

Terms Real Estate Beginners Should Know

  • Capitalization Rate: This is the formula used to calculate how valuable an investment deal is.
  • Net Operating Income: This is the money you are left over with after you subtract monthly expenses from rental revenue.
  • Return on Investment: This is the ratio between your net profit and the amount of capital used for the investment. The higher the ratio, the more money you have made.
  • Cash Flow: This describes the inflows and outflows of cash. For example, your inflow would be rental revenue. Your outflow would be the amount you spend on repairs.

Get Going

One of the best ways to learn real estate is by actually doing it. If you are not ready to jump in, you can get your feet wet by working with a real estate professional in your area.

You might have to do a little grunt work to make it worth their while to teach you. However, learning how to negotiate deals while working with a real estate professional will be invaluable as you continue to grow your investments.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s