How to Get Started Investing in Real Estate: A Guide

Are looking for ways to reinvest your money to help it grow? Have you always been intrigued by the real estate market and wanted to participate in it? If so, then you need to learn how to get started investing in real estate.

Doing so can help you begin this journey by placing your money into real estate investment options that are safe. That way, you can get your feet wet without taking on too much risk at first, then work your way up!

See below for an in-depth guide on how to get started with your investing and where the most potential lies for you.

1. Dabble in REITs

The process of investing in real estate can be scary for beginners. You might want to place some money in a home, condo, or townhome, but how can you minimize your risk at first? It’s better to build a foundation before you start investing in individual properties.

For that reason, we recommend that you begin by investing in Real Estate Investment Trusts (REITs, for short).

If you’ve never heard the term before, REITs are essentially real estate companies that have commercial real estate properties. This could be things like commercial buildings, apartments, hotels, retail stores, office spaces, and so on.

The best part of them is that they pay out high dividends. Some choose to take the money they earn off of it and use it right away. Others decide to reinvest those dividends to grow their money further.

Whichever route you take, make sure that you purchase REITs that are publicly traded. If you were to purchase a non-traded REIT, then you would have a tougher time finding someone to sell it to.

Publicly-traded REITs are bought just like any other stock. They’re purchased and sold just as easily!

2. Save and Study

Real estate investments are incredibly valuable and can offer a large payout. But make no mistake about it, they can cost a large sum of money to get started.

However, that’s a small price to pay if you start saving up your money while you learn more about the real estate market.

There’s something to be said for those that take a year (or more) to study the real estate market and save their money. It also helps make those investments easier to swallow as time rolls on.

Create a goal amount in your head. How much money do you want to have towards a down payment on a house? Create a budget for the year to help you work towards that final amount that you hope to save.

Let’s say you want to have $10,000 saved up in one year to use as your initial investment. That number divided by 12 (months) means you’d have to save $833.33 each month to have $10,000 ready to invest in a year.

Think again! Studies have shown that the average person—if they make a conscious effort—is capable of saving 20-percent of their annual salary without any setback to their everyday life.

If you have a $40,000 salary, then 20 percent comes out to $8,000. Now you just need to find a way of saving an extra $2,000 over 12 months.

3. Learn the Different Opportunities

Contrary to popular belief, there are many different ways that you can invest in real estate. Most people think you either own property by yourself or not at all.

Let’s go over a few of those options so that you can see what might make the most sense for you:

Sole Proprietorship– As the name would imply, you’re the sole owner of the property.
REITs– Previously mentioned in this article. Allows you to invest in companies that own properties, as you would when buying a publicly-traded stock.
Partnership– You and a few others are co-owners of the property.
Crowdfunding– This Allows you the opportunity to buy into a property and become a shareholder of it. Similar to a REIT, but different because—with crowdfunding—you’re investing in one property.
Syndication– This gives you the opportunity to invest in property without making any decisions. You invest with a group of investors to purchase a property.

4. Assess Your Commitment Level

No matter what real estate investments you make in your life, there’s one thing you’ll never be able to buy more of: time.

It’s important that assess how much of a commitment that you’re willing to make on your real estate investments. For instance, do you have the time and energy to keep up with renting out your property to a tenant?

There is no right answer, here. Use your answer to determine which of the above real estate opportunities you should invest in.

5. Keep the Market

Some of the property sales that you’ll see will astound you. For example, Franklin Street Brokers closed on an $18.1 million sale of their Aventura Apartments located in Orlando, FL. Find out more here.

Much like stock market traders, many real estate investors find it beneficial to keep up with the latest news in the real estate world.

This will help you identify different opportunities that you have to invest your money, as well as understand which way the market is trending at any given time.