How To Get Started In Real Estate Investing – The Right Way For Beginners
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At The Real Wealth Company, we have a philosophy that Business is for cash flow and Real Estate is for wealth. I have been involved in real estate investing since 2002 and am the first to admit it has it’s ups and downs and is probably not right for everyone! You need to consider your goals, resources and proclivities carefully before you decide to get involved in real estate investing. Managed properly, you should be able to see 20-30% returns on equity in your real estate portfolio (after counting all your profit centers – appreciation, tax savings, cash flow and debt pay down). This is a lot better than the 11% or so historical average of the stock market.
Is Real Estate Investing Right For You?
Real estate is a more active and management intensive type of investment. it’s important to remember that you can’t just put a property in your portfolio and check on its performance on the finance page of the Sunday paper. Even if you outsource your property management to another company, you’ll still have to keep an eye on things to make sure you’re comfortable with what’s going on there.
Sometimes, real estate investing pays off right away. Usually though, some invest for the long run. Some like to do both. I have a friend that started out in real estate investing with one home. He bought it cheap at auction, fixed it up and sold it at almost three times what he paid for it. He did this in a little over a year. That is a great return on an investment if you can find deals like that. He then used that money to buy two more distressed properties, and he then doubled his money when he then sold those improved homes.
If you want to get into real estate investing for the long haul, you can buy up properties to rent out to others. You run a bit more risk this way, as you have to worry about having tenants in your properties on a fairly regular basis, and you do have property depreciation to think about. You also have regular maintenance costs. However, if you have the right amount of properties, this type of real estate investing can really pay off in the long run. Some find that if they have enough properties, they can often retire early with a good amount from rentals on top of other types of investments.
Whatever way you decide to go with real estate investing, you do have to have some money to get started. You can try to buy properties with loans, but that does get complicated. However, it is doable. Either way, you are risking your own money. While buying and selling homes quickly might not work during some periods of time, renting for income is something that is always a good idea. No matter what the housing market is doing, there are always people who need a place to live.
Look Before You Leap Into Real Estate Investing
I got started with real estate investing using no-money-down strategies on single family homes. While this worked out okay, it was not a land-fall profit center by any means. What they don’t tell you in the real estate training courses you buy online is that even if you acquire the property with little money out of pocket, there are still expenses involved in maintaining it, and it won’t necessarily go up in value a lot right away…
If you plan on getting involved in long term real estate INVESTING (rather than the quick-flip real estate investing BUSINESS) then make sure that you can realistically hold on to any property you buy for at least 5-10 years without undue hardship. Real estate cycles last about 7 years, so you’ll need to be prepared to ride the bumps up and DOWN!
For more information on how to get started in commercial real estate investing, be sure to visit our sister site, The Real Wealth Blog.
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