Firstly, you need to note that real estate is a business just as much as it is an income-generating asset. Therefore, you should see and treat it like a business. Cashflows can make or break a business. Real estate is no different.
As a beginner, you should aim to minimize your losses by sticking with low-risk strategies. As you gain more experience, you can gradually diversify your real estate portfolio by incorporating riskier investments. Nonetheless, it is wiser to err on the side of caution regardless of industry experience. Even experts get it wrong sometimes.
Moreover, as an investor, you should ensure that the expected return on investment justifies the risk. No matter how attractive an opportunity may be, don’t forget to do your numbers. Below are some strategies for beginners to consider as they journey into the world of real estate investing.
The rise of Airbnb over the past decade has been meteoric. As a result, the demand for Airbnb has risen and continues to increase. You can look up pages like Brian Page Airbnb Formula for tips on leveraging opportunities in the Airbnb market space.
The potential for good returns is real in this market. Also, demand for short-term accommodation is relatively stable even though variables such as location, season, weather, etc., tend to influence demand levels.
Also, if you already own a house with vacant rooms, you can convert them into Airbnb’s as well. Sites like https://ggmoneyonline.com/ can give you tips on how to tap into the digital real estate market space.
Buy and Hold
Patience is the name of the game with this strategy. The good thing about investing in property is that its value appreciates over time. So, by simply buying a property and holding onto it for some time, its value will increase. Then you can sell it for a profit once it reaches a certain point, e.g., if you bought a property for USD$1 million in 2010 that’s now valued at USD$2.5 million, selling it would give you a profit of about USD$1.5 million, excluding taxes, transfer, and other costs. Point is, the transaction resulted in you making a profit. That’s the goal.
Therefore, this is a moderately safe strategy. All you have to do is buy and wait. However, you must ensure that you get the location and timing right. The location of a property determines its current and potential value. A good location allows the value of a property to appreciate along a favorable trajectory. You can also invest in places with high development potential, e.g., if the area has ongoing high-value construction projects, such as building a stadium or holiday resort.
In addition, for this strategy to work, you should buy low and sell high.
Rental Houses or Apartments
Being a landlord will ensure that you earn a monthly income. However, you should account for high vacancy rates.
You can use cash or a loan to finance the purchase of a house or apartment for rent. Only make sure that you do not borrow more than you can afford or more than necessary. You should try to steer clear away from accumulating too much debt when you’re starting.
When you buy and hold onto a property, you can earn extra income through short (for example, Airbnb) and long-term rentals. This is passive income that can be utilized elsewhere, e.g., bond or loan repayment.
This strategy is an active form of property investing and may not be the best starting point for beginners. House flipping will require a lot of hard work in terms of marketing and renovations. It’s best suited for the experienced, adaptable, and agile individual.
However, if you’re a beginner, you can still learn to do it if you’re determined enough. It’s also good to have an experienced guide to team up with to get the ball rolling in the beginning. You want to ensure that you don’t pursue it alone. It’s not easy.
Remember always to buy low and sell high. Establish your margins before taking on a project.
Real Estate Crowdfunding
This form of investing has gained popularity because it is an affordable investment option. These platforms collect funds from several small real estate investors to buy real estate. However, you don’t have control over how your funds will be invested. You can invest in real estate crowdfunding for as little as USD$500 on some platforms. This scheme is an excellent way for beginners to earn passive income.
Real Estate Investment Trust (REITs)
This last approach resembles stock market investing. Just like real estate crowdfunding, you don’t have to own any property of your own to invest in REITs. You simply need to research the best REIT and pick the one that works for you. Once you buy shares in that REIT, you are entitled to receive dividends. The value of dividends depends on the performance of the trust.
Unlike real estate crowdfunding, the downside is that most REITs have strict capital requirements, which may inhibit beginner investors from investing in them.
As a beginner, you must train yourself to see real estate as a business, not a hobby. See it as an asset that can yield a return on investment. Ensure that your actual returns justify the risk you undertook.
Moreover, when buying real estate, whether you will use it for rentals or flipping, ensure that you purchase real estate below market value. Minimize your losses and maximize the profits.
Furthermore, if you’re looking to invest in real estate with low capital, real estate crowdfunding is your best bet. The disadvantage with real estate crowdfunding and REITs is that you don’t get intimately involved in the world of real estate investing. However, it can be a good start.