You’ve heard all the great things about real estate investment — it’s safe, profitable, tangible, and the value of your investment always grows — and now you’re ready to get in on the action.
Thankfully, there are many paths to success in property — and opportunities are available to everyone. No matter how you decide to invest, real estate can be an incredibly rewarding way to diversify your portfolio and grow real equity. With rising home prices across America, the popularity of real estate investments is only going up.
Here are a few tips for aspiring investors looking to break into the real estate investment market:
5. Get Involved with Real Estate Investment Groups
Investing in property doesn’t have to mean buying a physical house.
Real estate investment groups are companies that buy up property and sell ownership to a pool of investors. This is like a mutual fund for real estate, in that all you bring is capital and the fund managers take care of the investing parts on your behalf. Real estate investment groups will not only find the best properties to invest in, but will manage and maintain those properties in return for a small percentage of the profits.
This is a hands-off, low-commitment way to get your feet wet in the world of investment properties. Note that as with any investment, you need to do your due diligence in selecting a reputable organization that you trust to be managing your money and property.
4. Understand Key Real Estate Investment Concepts
As you start to get serious about real estate investment, you’ll need to understand the different metrics and ideas behind successful investing.
Even learning the language can be tricky. Do you know what a cap rate is, or cash-on-cash returns, or what constitutes a capital gain? Not only should you be able to define these terms, but you should also learn to develop an intuition about them that can guide your investment decisions.
As these fundamental ideas become more intuitive — research will help, but only experience can truly teach — you’ll more fully understand how to value properties, work out potential income, and estimate asset appreciation. If you’re looking for a shortcut to this knowledge, your best bet is consulting with someone truly educated and experienced in the real estate market.
3. Invest in Real Estate Investment Trusts (REITs)
A REIT is similar to a real estate investment group — simply bring money to the table and the trust will turn it into partial property ownership. Unlike investment groups, REITs are structured like dividend-paying stocks. The companies behind them focus on commercial real estate like hotels and office buildings that are typically inaccessible to individual investors.
A well-managed REIT can be an excellent source of regular income and is a highly liquid investment compared to many other real estate options. Investing in one is as simple as opening up a brokerage account. And you wouldn’t be alone: the market cap of REITs has risen from $1.5 billion in 1971 to $1.1 trillion in 2017.
2. Learn About Leverage and Limited Liability Entities
Leverage is one of the powerful draws of real estate investments. The concept refers to the fact that properties can be purchased for a fraction of their total value — this is the down payment of a traditional mortgage. But once you close on the deal, the real estate asset becomes yours to control and profit from as you will. As you do so, your equity in the property will grow and the house will presumably appreciate in value — but this is just icing on the cake.
Once you decide to start using the power of leverage to your advantage, you’ll want to set up legal safeguards like LLCs through which to invest. By setting up a company to purchase real estate on your behalf, you can mitigate the risk of the investment failing or a lawsuit being brought against you. Look into setting up one of these limited liability entities to make sure you’re investing safely and protecting your personal assets.
1. Find a Great Real Estate Agent With Investment Experience
A good local real estate agent — like a top-performing Clever Partner Agent — can be your best asset when seeking out profitable investment properties in your market. No one knows this market better than the professionals buying and selling within it every day.
An experienced agent can be a huge help to any investor, no matter how experienced. If you are just getting started, a real estate agent will have invaluable knowledge about concepts like cap rates and leverage, as well as customized advice about property values, rental income assessments, and home appreciation.
Finally, Clever Partner Agents offer buyers a Home Buyer Rebate that puts up to 1% of the purchase price back in your hands. If you’re ready to invest, you’re ready to make money. Clever can help you get it.