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Do you have an entrepreneurial spirit and a desire to get grow your net worth? For many, an effective way to do this is through real estate investing. The reason for this?
Real estate offers many strategic benefits, including the ability to use leverage (mortgages) and benefit from numerous types of tax deductions. It also offers the ability to capitalize on market inefficiencies—meaning, you can often buy real estate under it’s true value. That’s very difficult to do when it comes to stocks, bonds, and mutual funds, for example.
Also, real estate offers the power of cash flow, paired with debt paydown by tenants and the potential for long-term price appreciation. In aggregate, these benefits of investing in real estate are both rare (not found in other asset classes) and extremely compelling.
You might feel lost if you’re new to the real estate game and have no idea how to get started. Thankfully, it’s easier than you might think. If you’re wondering how to get into real estate, keep reading.
Here are the easiest ways to get into real estate.
1. Invest in Rental Properties
Rental properties can be a phenomenal source of income, as well as long-term debt paydown by tenants, price appreciation over time, and tax advantages.
Meaning, investing in rental properties can be a great way to grow your wealth. However, it is essential to do your homework and to be prepared for the potential challenges that can arise.
You will want to find a property in a thriving neighborhood that people will want to rent. You’ll also need to set aside a reserve fund to cover unexpected repairs and vacancies. If you want to earn the maximum amount from your rental property, then you’ll need to roll up your sleeves, list it for rent, and lease it out yourself.
Or, to make your life easier, you can hire a property manager to rent out your property and manage your tenants. For compensation, the property manager will usually charge the first month’s rent, as well as 8-10% of the monthly rent over time.
2. Fix-and-Flip Properties
Another way to get into real estate is buy a fixer-upper and flip it for a profit. This is where you buy a property, make improvements, and sell it for a profit. This can be a cheaper way to get started in real estate, because it does not require much capital.
You could also partner with an experienced and successful flipper. By shadowing and assisting with the day-to-day tasks involved in the process, you can learn a great deal about what it takes to be successful in the industry.
This will also let you get a feel for the type of properties that are most likely to turn a profit.
3. Rent Out a Bedroom
If you’re not ready to go “all in” with real estate investing but currently own your home, then you could get started by renting out an empty room.
Naturally, you’ll want to do a credit and background check before letting a renter into your home. You will also want to collect a security deposit and sign a formal lease, even if the terms are for month-to-month rental of a single room.
This will protect you if you get into a messy renter situation where someone refuses to pay.
4. Rent Out Storage Space
If you want even less of a commitment but would like to collect some passive income in the form of a monthly rental check, then renting out a storage space could be a great fit for your real estate goals.
If you have a storage space, an unused basement, or an empty garage available, all of these spaces can be rented out on a month-to-month basis.
So, think creatively. What are some spaces that you are not using to their max capacity?
Using the website Neighbor.com, you can rent out either physical storage space or vehicle storage space. Both are great options!
5. Buy an RV and Rent It Out
Another option for getting into the real estate game is to purchase a less expensive type of real estate, such as a recreational vehicle (RV). Usually, a new RV costs between $30,000 to $100,000. However, used RVs are often much cheaper and can be priced as low as $10K to $20K.
Plus, most RV vendors have lots of financing options available, which means that you can acquire them for a small down payment while making loan payments over time that may only be a few hundred dollars a month.
After acquiring an RV, you then rent it out on one of these popular sites:
As long as the monthly cash flow that you are making from renting out your RV exceeds your costs to acquire and maintain it, this can be an inexpensive way to get started in the world of real estate investing.
6. Real Estate Crowdfunding
Another easy ways to get into real estate investing is by becoming a passive investor in other people’s deals or real estate funds.
One way to do this is to invest through a real estate crowdfunding platform that allows individuals to pool their money together to invest in properties.
There are several online platforms that offer this opportunity, with CrowdStreet.com and Fundrise.com being the two best known. Other companies that offer this option include:
- Arrived Homes
- LEX Markets
- Streetwise
- RealtyMogul
- Groundfloor
The benefit of this approach is that you can often get started in real estate for small amounts of money, often as little as $500 to $1,000.
7. Real Estate Syndications
Next we have real estate syndications. Real estate syndications are when you become a silent, passive investor in someone else’s deals. You could do this by partnering with a local person who is a savvy real estate investor.
Alternatively, you can do this by investing as a “Limited Partner” (called an LP) in other people’s real estate deals or funds.
A “Limited Partner” is someone who invests money in exchange for an ownership stake in a real estate asset, but whose financial downside is limited to the amount of money they invested. This person is not involved with the day to day operations of the asset.
Some companies that offer this opportunity are:
- BoaVida Group (theboavidagroup.com) – Invests in manufactured housing communities and RV parks
- Cadre (cadre.com) – Invests in multifamily, industrial, office, and hotel properties
- Cardone Capital (cardonecapital.com) – Invests in apartments (multi-family properties)
- Realty Mogul (realtymogul.com/
investment-opportunities) – Invests in apartments - Patriot Holdings (patriotholdings.com) – Invests in mobile home communities, self storage, and industrial assets
Of course, there are many other options too. You can see a full list real estate syndications here.
8. Buy REITs
Real Estate Investment Trusts (REITs) are portfolios of income-producing real estate assets, such as office buildings, retail centers, apartments, and hotels.
For a beginner, they are an easy way to get exposure to the real estate market without directly owning or managing any property.
REITs are traded on major stock exchanges. You can buy and sell it like any other stock, so you just need to know their ticker symbol in order to buys shares. You can use apps like Robinhood, SoFi, Axos, or others to easily buy shares of REITs using your smartphone.
Examples of REITs include LTC Properties, Inc. (LTC), CTO Realty Growth, Inc. (CTO), and others.
The downside of REITs is that you own shares in the REIT instead of shares in the actual assets, so you will lose many of the benefits of direct real estate investing. However, if the real estate market does well, this is a way to capture some of the upside and it is a truly passive investment.
Getting into the Real Estate Investing Game
Investing in real estate can be very rewarding, both financially and personally. The best way to get into real estate is to get educated. I’d suggest that you either into taking some classes online, join a local real estate club, or get to know someone who is already investing in real estate who can show you the path.
Once you understand the basics well, start shopping real estate and making offers on properties that fit your criteria. Many opportunities are awaiting you. So explore your options and find the one that best suits your needs and interests.
Want to learn more ways to improve your finances, investing, or health? Explore the rest of the blog today.