Real Estate Investing for Beginners: 4 Ways to Get Started Today!
4 February, 2020
Invest in real estate is a smart way to make money and protect your assets from stock market volatility. If you are a beginner real estate investor and ready to buy your first investment property, here are a few things you should know before getting started.
This is a blog focused on real estate investing for beginners, because just like you many real estate millionaires started and I am sure you would like to follow the same steps.
Here are the best ways to start investing in real estate today:
- Identify Your Current Financial Stage
- Learn About the Real Estate Market
- Learn About Property Appreciation, Tax Benefits, REITs
- How to Find the Perfect Real Estate Investment?
How to Identify Your Current Financial Stage
Determining your current financial situation is a critical part of investing and will play a leading role in figuring out which real estate investments are best for you. Lay a strong foundation for all of your financial planning activities by evaluating your total income, savings, living expenses and debts. The easiest way to do this is to make a list that includes the balances of all of your current assets and liabilities, including how much you regularly have to spend for necessary items like insurance, fuel, food, entertainment and any other routine ongoing expenses.
"If you want to diversify your [financial] portfolio, real estate is a great first step". wrote CNBC. "Before you start investing in real estate, it’s important to have a solid financial foundation. That means minimal or no debt, healthy retirement savings and an emergency fund with a least three to six months’ worth of expenses stashed away".
Learn About the Real Estate Market
Next, it’s time to decide where you plan to invest in property and get familiar with the local real estate market, including basic factors and principles that shape the area’s economy, as well as where and how to obtain relevant, timely marketplace data to ensure that you always have access to the most recent information. Also, be sure to take a look at supply and demand, future profitability and to identify any location advantages, as well as consider any potential impacts of appreciation and regional demographics. Finally, it’s important to check out the specific features of recently listed and sold properties in the area, as well as any other unique economic, social, political or environmental data that may impact the local real estate market where you are considering investing.
"Investing in real estate, and more specifically, owning income-producing rental properties, continues to be a good investment strategy", wrote Forbes. "Investors can add real estate to their portfolio for diversification and as a hedge against inflation".
Learn About Property Appreciation, Tax Benefits, REITs
If you are a beginner to real estate investing, there are three things you should become familiar with before deciding how to invest your money: Property appreciation, the tax benefits of investing in real estate and why REITs offer a truly unique solution for investors who aren’t keen on the idea of directly managing investment properties.
Property Appreciation. This simple concept refers to how much your investment property value increases over time. The value of an investment property (appreciation) can also increase more rapidly after repairs, construction or other building renovations are carried out.
Tax Benefits. There are many tax benefits for real estate investors, including the deduction of mortgage interest and the amount of interest paid on loans that are used to repair, acquire or improve an investment property. You can also deduct a portion of the cost of the property over several years - a process known as depreciation - along with the actual cost of any repairs, travel, equipment, office expenses, insurance, legal and professional services, contractors and other employees. You can also rent out a vacation home tax free in some cases, and when you invest in real estate or a private real estate investment trust (REIT) like the KASA Investment Fund using money that is currently in your 401(k) or IRA account, you can even collect tax free income for retirement!
"A hands-off alternative to direct real estate investment is a real estate investment trust", wrote CNBC. "These firms sell shares to investors, use the cash to buy property and pay dividends to shareholders".
REITs. A real estate investment trust, or REIT, is a hands-off option for beginners to invest in real estate without having to handle the day-to-day challenges of managing a rental or other type of investment property. Whether public or private, a REIT is typically offered by a company that owns, operates or otherwise finances income-producing real estate, giving investors at every level of sophistication the opportunity to own valuable real estate and enjoy access to ongoing income and ROI that almost always beats what the stock market can provide over time.
"With REITs, it’s now possible to invest in a large portfolio of real estate assets that gives you many of the same benefits as direct [property] investing and more", wrote Forbes. "REITs offer many of the same benefits of direct real estate investment, such as rental profits, as well as solve many of the problems, such as a lack of liquidity and diversification".
How to Find the Perfect Real Estate Investment?
First, you should always strive to purchase investment property at a price that ensures you will be able to make a profit and has considered an exit strategy. In other words, buy smart! Second, never forget that with real estate investing it’s almost all about LOCATION, LOCATION, LOCATION! Although the Internet is a powerful tool, never underestimate the power of fostering strong local networking connections, especially if you’re buying real estate outside of your home town or country.
And while you can’t predict exactly where any market will go, you can see exactly where it has been and where it is right now. While no one can tell you exactly what your investment property criteria should include, most of it will revolve around the type of real estate you have decided to invest in. For example, if you have decided to be a “buy and hold” investor of small multifamily units, your criteria will probably exclude commercial buildings.
"Location and condition are two key determining factors in deciding if a property is a good purchase", wrote Forbes. "Being able to discern if a home is worth its investment takes a keen eye".
