Real estate investments are one of the best ways to make money over both the short and long term. It can be challenging for beginners who don’t have experience in real estate because there are so many different options.
Strategies in Real Estate for Beginners
If you’re a beginner, it’s important to know what you want to accomplish and what you would like the end result to be. Do you want to do it on the side while you continue with your career, or do it full time and be more hands-on?
As a beginner, it is easy to bite off more than you can chew. Here are four investment strategies that are helpful for beginners.
Long term rental properties
Buying an investment property to rent out on a long-term basis is one of the best ways to make money in real estate. You can make money through rental income over the short term and build passive income.
Holding the property for an extensive period means that when you eventually decide to sell it, it will have appreciated in value. If you buy the property at a low value, you stand to make a good profit over the long term.
You may decide to manage rental properties yourself, but it is often more cost-effective to hire a professional property manager to take care of the business operations for you. Everest, KeyRenter, and Greyhaven have Atlanta regional property managers that will assist you with finding a great tenant, maintaining your property, and collecting your rent. Each month you will receive a report of the rent collected and the maintenance performed on the property. As soon as you sign a management agreement and hand over the keys, the company will begin managing your property for you.
Fix and flip
Generating income from rental properties is not necessarily a completely passive idea but fixing and flipping a property is a very active one.
You will need to purchase a property in poor condition, repair it and fix it up so you can sell it at a good profit. You can make money faster in this way than by holding on to a property for a long period.
The problem is that executing a successful flip is much more challenging than what it appears to be on TV. First of all, there is competition for houses to flip, and you will need to attend auctions etc. until you find a suitable house to make an offer on.
There are many expenses that you have to keep under control. Repair expenses are only part of the equation, and you will also have financing costs and other costs like utilities, insurance, taxes, buying costs, and selling costs.
The fix and flip strategy requires very active, hands-on involvement to find a distressed property for sale that’s below market value and manage all the repairs.
If you’re used to doing DIY work, this could be a good option for you, but if you can’t do the repairs yourself, you will have to hire and manage contractors to do them.
This can be expensive, especially if they run into problems and delays. You will also have to market the property to potential buyers and get a good price.
Another way for you to start out slowly if you’re a beginner investor in the real estate market is to invest in a real estate investment trust (REIT). This is quite similar to investing in stocks. There are many different REITs, and not all are created equal. You will have to conduct some research into the top REITs before choosing one.
Some of them invest directly in properties, and others invest in real estate debt. They tend to focus on a specific sector of properties, such as hotels and resorts, retail shopping centers or hospitals.
If you choose the right REIT, it can provide greater diversification and lower risks. You will receive dividends if your selected trust does well. REITs do have strict requirements about the minimum amount of capital you can invest, which can make them unaffordable for certain beginners.
Lease options are often overlooked, but they can generate good profits. It is also a good strategy for beginners. You can put together a creative real estate deal by looking for a house that has been on the market for a long time.
You may not be able to buy it immediately, but you can offer to rent the property for a fixed period of time with the option to buy it when the lease agreement expires.
One of the benefits of an arrangement like this is you have the experience of living in the property before buying it. You can find out whether the house and neighborhood fulfill your expectations.