There are many ways to start in real estate investing. Choosing the right path will be determined based on your financial resources, your energy, and how much time you have and want to invest in investing! For many people it’s a family affair, for others it’s a solo adventure they do on weekends. Becoming a real estate investor is not a one size fits all adventure, but it is important to lay a solid foundation.
One of the most secure ways for first-time investors to start is to partner with a person or a group that is already investing. These people know the ins and outs of investing. They likely know how to get funding or may already have funds. This group also probably has a team of contractors that they trust and work with often. They probably even have someone on their team with a real estate license to help them save on commission costs.
If you are lucky enough to find an investing team to take you on, don’t expect to be leading the charge too soon. There is a lot to learn, and you should do all that you can to soak up the knowledge that they have built up over the years.
In your spare time you should be reading as many blogs (like this one!) or articles about investing and real estate as you can. You will learn different strategies and opinions about the industry and that knowledge will help to you become a better investor in the long term.
Although there are lots of ways to make money with real estate, the three most popular are:
- Real estate wholesaling
- House flipping
- Investing in rental property
Each of these comes with different benefits (and costs), and you should learn about all of them before deciding which is best for your situation.
Real Estate Wholesaling
One way to get into investing is with real estate wholesaling. This means that you are basically an intermediary, you search and find homes that are ripe for flipping, you buy them at a deep discount and then sell them to house flippers. This results in a smaller profit margin, but also less manual labor or carrying costs. For more information, check out The Beginner’s Guide to Real Estate Wholesaling.
Rental Property Investment
One of the most popular entry points for real estate investors is through rental property investment. There are a few basic steps to purchasing your first rental property.
- Determine your budget for the house and the income. A great tool to help you with this is: How to Value A Rental Property (CALCULATOR INCLUDED)
- Start your search for a rental property, either looking online or working with a real estate agent.
- Make an offer, have an inspection and get to closing! This sounds easy but is actually pretty involved.
- Make any necessary improvements.
- Find tenants.
- Start collecting rent money!
These steps are just a high-level overview, but to learn more, we suggest reading 20+ Terms all Potential Rental Property Investors Should Know.
Becoming a real estate investor through house flipping is potentially a bigger money maker, but also involves more work and more resources. How to Flip a House (And Actually Make Money) gives you an in-depth explanation of the process, but here are the highlights:
- Find a fixer-upper that’s for sale and calculate what your return on investment.
- Buy the house.
- Gather your contractors, designers, and improvement budget.
- Get to work!
- List and sell for a profit.
House flipping can be tricky, and you want to make sure not to “over improve” or to buy a home in a less than desirable location. There are lots of tips for making house flipping successful, so make sure you’ve done your homework.
Multiple Ways to Invest
Some investors like to stick with one way of investing. For example, they only flip houses and don’t hold any rental properties. Others like to diversify their investment portfolio and have some rental properties while flipping houses at the same time. Whatever combination you choose, make sure becoming a real estate investor is for you!