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How do beginners invest in real estate?

How do beginners invest in real estate?

We all know that the real estate industry has produced thousands of millionaires and is one of the very best sectors of the market to produce wealth. In fact, every single billionaire today has some of their wealth in real estate. But the real question is How do beginners invest in real estate – before they become really wealthy?


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The following six strategies will show you how you can get started building your real estate empire even if you are a beginner.

1. Purchase REITs. A Real Estate Investment Trust (REIT) is a company that owns (usually) commercial real estate – such as shopping malls, office buildings or apartment complexes and hotels. They pay their shareholders high dividend rates which make them attractive to investors and their stock can be traded on the public exchanges. This makes them easy to buy and sell (liquidity) and they are regulated.


How do beginners invest in real estate? | Purchase REITs

Some REITs operate in specialty niches and are very focused on a particular segment of the market. While this is very easy for a beginner to get exposure to the real estate market you are still holding a piece of paper and not a real tangible asset that you can visit and walk around – it may not ‘feel’ like real estate investing.


2. Own a home. You may think that simply owning your own home is not a real estate investment but you would be wrong. For the vast majority of people owning a home is the largest most valuable asset they will ever purchase. This real asset will give you an idea of all that is involved in owning and investing in real estate.

You will learn about the value of location. How property tax works, the need for regular maintenance and repairs to maintain value. How to arrange for financing with a mortgage company and how additions and renovations can add value to your property.


3. Rent out a room in your home. If you want to generate a little bit of income from your home to help pay the mortgage and you have a spare room in the house you can list with a company such as Airbnb.

There is no long-term commitment and renters are at least required to go through a preliminary screening process. Airbnb also has a host guarantee to protect your home against damages. This will help you to pay down your mortgage faster or generate a little extra monthly income and who couldn’t use that?


How do beginners invest in real estate? | Private fund companies

4. Private fund companies. These are companies that collect pools of money from individuals and invest directly in real estate. The goal of these companies is to invest in income producing properties, such as luxury hotels, so that they can pay their investors a regular disbursement from the profits that the business generates.

While you don’t own the real estate directly yourself, it is possible to visit the properties under management and you get to take advantage of the benefits of owning real estate. Diversification of assets, a hedge against inflation, stable income and an appreciating asset over time. You can avoid the negatives of property ownership as well – property maintenance, credit checks and collection, finding tenants, adding value to the property, paying the taxes and managing the books of the business. The downside is that often these companies are illiquid meaning that it can take time to sell your stake.


5. Rental property. You can purchase a second home and rent it out to generate income for yourself. If you are particularly handy with DIY projects you can save yourself some money on repairs and renovations by doing it yourself.

The key is to make sure that your rental income exceeds your expenses each month. You need to put a little away to allow for repairs or to pay a property manager if you don’t do it yourself but this can be a fantastic way to generate income. Once you are comfortable with owning a property you can look at multiplying the number you control and really increase your income.


How do beginners invest in real estate? | Rental property

6. Flipping houses. Made popular by HGTV reality shows this strategy involves buying undervalued real estate and fixing them up and re-selling them for a profit. It can be tricky if you are not familiar with estimating renovation costs or the local real estate market, but done right it can be very rewarding. You may want to partner with a general contractor and/or a real estate agent to take advantage of their skills while you learn the ins and outs of this particular market.

As you can see there are several different strategies that a beginner can employ when investing in real estate. Real estate investing allows you to avoid the stock market cycles and volatility while still producing excellent and stable income. You can hold an appreciating asset that is ultra-secure (especially if you make your purchase without going into debt). Whether you are just purchasing REITs or renting out a room on Airbnb to owing a neighborhood of rental properties or flipping them all for profit there are a number of strategies you can employ to get your real estate empire off the ground.


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