How To Invest In Real Estate: A Guide
Investing in real estate can feel like something "other people" do. Do you have to be a real estate "mogul" to earn money from property investments? Can anyone be an "investor?"
The answer to that last question is "yes"—if you have the right plan and strategy for long-term success. Almost anyone can buy a property investment and be an investor. However, not everyone that operates a rental property or looks into other ways to generate revenue from real estate does it successfully.
What do potential investors need to know about how to get into real estate investing? We put together this guide with our best Boston property management insights to help you understand the basics and get started right. Keep reading to learn more!
Table of Content
Real Estate Investing Basics
While investing in real estate doesn't have to be complicated, the most successful investors start by learning the basics. There are a variety of ways to get into real estate. Choosing the right path, properties, and management strategy is critical to your success!
What Is It?
What does it mean to invest in real estate? Real estate investing is purchasing, leasing, ownership, or selling land or buildings to earn money. So whether it's your full-time way to earn a living or it's a part-time secondary source of income, owning rental properties or investing in real estate to generate revenue makes you an investor!
However, you have options. Whether "active" or "passive" investing is a better fit for your goals or lifestyle, there are plenty of ways to make money!
Active Real Estate Investments
While one of the most common ways to make money in real estate is residential rental property investing, investors aren't limited to that single option. Being a landlord with a residential rental property can consist of owning a single-family home, multi-family building, condo, or townhome that you use to generate rental income. While this is considered an "active" type of investing, you don't have to physically operate a rental property yourself to make money from it!
Hiring a Boston property management company is the best way to turn an "active" real estate investment into a more "passive" investment for you. Your property manager handles every detail and day-to-day task while you enjoy the monthly rental income. Then, when you're ready to sell the property and move on to another investment, you also benefit from the home's appreciated value.
Other ways to be an "active" investor include fix-and-flip opportunities and commercial real estate investing. When house flipping, investors buy a home in poor condition, renovate, then put it back on the market to sell at a higher price. These projects can take place within a month or two, depending on inventory and project timelines. It can be an excellent way to make quick cash from home sales, and investors never have to deal with tenants!
With commercial investments, property owners deal with business spaces like restaurants, retail, or office buildings. Instead of renting to residential tenants, you deal with business owners to maintain building occupancy and cash flow.
Passive Real Estate Investments
Not everyone wants to buy and sell properties or be a landlord—and you don't have to be one to benefit from real estate investments. As a beginner, what could your real estate investment look like if rental homes and managing renters isn't how you want to get involved? "Passive" investments could be a better fit for you.
Passively investing in real estate means you still deal with buying, selling, or leasing property and land. However, in most cases, passive investments don't require you to spend any time or build experience to manage properties.
Real Estate Investment Trusts (REITs) and real estate stocks provide a way to invest funds in properties managed by funds or corporations. With this type of passive investment, you choose a fund (or several) and buy something into the funds with purchases of stocks or shares. The fund pays out dividends to you, and you enjoy the income!
What Should Investors Consider For Rental Property Investing?
When choosing "real" property, like residential real estate, there are a few things to consider as you get started. Whether you're new to the idea of investing or you're ready to generate more long-term wealth from a portfolio you've already started, our property management experts recommend thinking through these things:
- What type of property is best for your goals? From single-family rentals to condos or townhomes, make sure the property you choose is the right fit for your management style and income expectations.
- What's your budget? Are you financing a rental property through your personal savings? Are your finances in order to qualify for good financing? While rental income will help you recover costs, you need money or financing to purchase a property and get started.
- Location and property value. An excellent property in a bad location can be a costly mistake. Work with a property manager to analyze the location before buying a property to make sure it's attractive to potential tenants. A property management expert can also run a rental market analysis to help you understand property value if the investment will be good for your bottom line long-term.
- Local, state, and federal laws. Operating a rental property comes with a lot of responsibility and potential for liabilities. Review current laws and make sure your property and management efforts comply!
Partnering with a property management company can be the best way to think through these things before making a property investment. Their experience can help you estimate the return on investment and manage the property to meet your financial goals.
How Can Real Estate Investors Get Started?
Before you do a quick online search and buy the next available home, take your time and do some critical research to find the right deal with the best potential for excellent returns. Not every home for sale makes a good rental property, and successful investors need to understand what to look for in a good investment.
A property manager can help with the research! They can connect you to motivated sellers and properties that haven't hit the market yet. Working with a wholesaler can also be a good option if they're reputable in the market. The right property management experts and a real estate agent can help you navigate the bidding process, find the financing you need, and avoid bad deals.
However, before diving into your first deal, it's smart to dig into real estate investment books, blogs, podcasts, and online courses to build your knowledge base. These resources are plentiful, but make sure they come from reliable and verifiable sources to help you find success. For example, an online search for the best "real estate investing books" can generate results for well-curated lists from industry experts.
You'll also find online courses that offer expert insights into how to invest successfully. As with your book selections, make sure to verify courses, hosts, and organizations offering these resources. While there are plenty of excellent courses available to aspiring real estate investors, there are also plenty of scams or webinars that over-promise and under-deliver, or simply take your money and run. Choose wisely when following industry experts, networking with local industry professionals, or purchasing educational resources to increase your knowledge!
How to Create Long-Term Wealth
So you've read up on real estate investing, you've done some market research, and you're ready to dive in! Can you become a millionaire real estate investor? Here are a few more things to consider as you get started or build more wealth through a successful real estate portfolio.
Local vs. Long-Distance (or Both)?
Should you only invest locally? Should you consider long-distance rental properties? How does it work to own a rental property in a state where you don't live?
Starting where you live is an excellent place to build experience and learn what it takes to find and manage successful rentals. Branching out and researching other markets can help you add more properties to your portfolio and experience the benefits of hot rental areas around the country. Whether you invest locally or out of state, choose local property management experts to handle properties and maximize returns!
Find the Right Financing
Many real estate investors don't start by buying a property with cash only. Financing is common, but it's important to research your options and choose funding that helps you maintain a good ROI when you start collecting rental income from your property.
Investment property financing options can include mortgages, crowd-funding, or investor groups when owners partner to purchase properties. No matter how you raise funds for a property, follow the law, research your sources, and make sure your rental income covers a mortgage payment and other ongoing expenses that come with operating rental properties.
Hire a Property Manager
Partnering with the right property manager is one of the best real estate investing strategies to get started! Whether you're looking into creative real estate investing strategies or simply hoping to find a good rental property to make your first investment, a Boston property management company can guide you to success. Property managers have the experience and insights you need to manage tenants, find good properties, set the ideal rental rates, and maximize returns for more long-term wealth.
Learn More About How to Get Into Real Estate Investing
While we covered a lot here, we haven't touched on everything we can offer investors interested in learning more about how to get into real estate investing! We love helping rental property owners make more money, and we've put together a free resource that can help. If you're ready to add another guide to your knowledge base, download our free ebook, "How to Invest In Real Estate: A Guide."