Real estate investing: 4 different ways to get started

December 08, 2022

We can confidently say that from the beginning of property owning, real estate has always been a great investment. This kind of business is way more versatile and complex than you may think. In fact, there are many aspects to take into account when dealing with real estate transactions. This is why here we present 4 main different ways to get started in real estate investing, with their respective subcategories and lists of characteristics and aspects:

#1 Buying rental properties
Firstly, we got the classic real estate investment model, which is buying a property to make a profit from its rent. This is a form of making money in different ways, even though the market works cyclically and has undefined ups and downs, real estate acknowledges, and with time you will probably be able to make a profit from the property you are dealing with. Plus, rental properties cash flow by their economic nature, not only does a tenant help pay your mortgage debt for you (if you have one), but also renting covers specific property taxes, your insurance, and last but not least, it puts money in your pocket every single month. Also, renting includes some tax benefits, so, the money that you use for maintaining your rental properties has the great quality of being tax-deductible, which means that you save money on your income taxes thanks to your rental properties. Here are two different ways to invest in real estate properties:

Buying single family homes: This is the best way to start investing in real estate if you have no experience on the field. The key for this kind of deal is to find the right property to buy and find quality tenants for renting it. Before you buy a property, you have to make sure that it will be cash positive since the first month of the contract. You need to be confident that the amount of rent that you will be charging, will cover your expenses and will make you profit every month. The best you can do is to look for reliable tenants that will pay on time and are willing to be in the house for a good amount of time.

Buy multifamily residential: Working on a real estate plan, you don't necessarily have to grow your investments in just one kind of portfolio at a time. If you have the capital, you can acquire multiple properties in one single transaction by buying a multifamily residence. This can look like anything from a classic duplex, a small apartment, or even a large apartment residential community. This more or less works like buying a single family home, with the difference that you could live in one of the properties, and you could pay your expenses from the rent of your tenants, and also you can be close to keep an eye on everything if you want to. Also, you can make more profit, but this also would demand more work and attention, so it is a great way to make a good profit, but you need to be organized to keep up.

#2 Flipping properties
You may think that fix and flip is something focused just in single homes. But this is not necessarily the case. You don't have to limit yourself to the traditional single home fixing and flipping business. You can do this process with single, multi, commercial, or any kind of land you could work with in general. Nonetheless, it has to be noted that the tendency is that flipping residential and commercial properties is more profitable than for example industrial, because of their demand differences. You need to have in mind that fixing and flipping is not as easy as it watches on TV shows. Reality can offer many issues of which you need to be aware of, because they can appear at any moment. This is why you need good financial planning and a study of the market before you start investing in this kind of real estate jobs and transactions. As a sincere advice, you should probably only consider fixing and flipping in an actual hot market, when prices are rising fast, in where you can be assured that in a few months the property you are working on will be making you profit.

#3 Investing without actually buying property
Before we get into different ways to invest without necessarily buying a property, we have to talk about wholesaling. This is a very specific type of flipping which works in this way: rather than buying a property and selling it to a brand-new owner, a wholesaler sells a property before they actually buy it. Instead of flipping a real estate asset, they flip the purchase contract. You basically make a profit from finding a good deal and selling the contract to another investor for more than what you originally agreed to pay. With that said, here are two different ways for investing in real estate without having to buy a property first:

Crowdfunding and real estate groups: These two allow you to pool your money with other investors to buy a bigger piece of a deal than you would be able to afford if you were on your own.

Real estate mutual funds: These are traded on the stock exchange. Basically, you are buying a share of the fund instead of buying the physical property. This fund is made up by different real estate investments, carefully picked by the manager of the group.

#4 Renting out your existing space
Even if you have few or limited funds, you can still make money in real estate. What you have to do is to simply rent out your existing space. Examples of this can be renting a room in a house that you own, renting out a parking lot, or renting a facility that you count on like a pool or a gym.

Conclusion
There are multiple ways to get started and develop your investment projects. This is why it can get difficult sometimes but, as you read before, there are many alternatives to real estate investment that can help you out pursue your property goals and your life ambitions with good profit.

Keep in mind that we have financing options designed to provide efficient solutions for your real estate investments, we offer you the opportunity to close quickly with a reliable and experienced lender as your financing partner. Do not hesitate to count on us when you need financing for your real estate investment, we can offer you a wide range of financial products to suit your needs. If you have any questions or would like more information, call or text us at 800-369-2342.