Want to get into real estate investing? Our Real Estate Investing 101 guide is designed for real estate beginners and those interested in learning the basics of real estate investing.
If you have been considering getting into real estate investing but are worried about your inexperience, we aim to get rid of your worries and concerns and overcome your fear of starting real estate investing with the easy-to-follow tips as well as considerations for a sound investment strategy.
Real Estate Investing offers many great financial benefits, including the opportunity to earn passive income, diversifying your investment portfolio, benefiting from appreciation when real estate values increase, and more. The great news is, as a beginner, you can start out slowly and keep building your investment portfolio at a pace that is comfortable for you.
EquityDoor has put together a real estate investing 101 guide that is designed to help novices learn about real estate investing, including basic concepts, tips and tricks, and guidance on how to get started.
Real Estate Investing 101 Guide Contents:
Here are the contents that our real estate investing 101 guide will cover:
- Reasons to Invest in Real Estate
- Commercial vs Residential Real Estate Investing
- Choosing a Location
- Finding an Investment Strategy That Works for You
Why Invest in Real Estate? 5 Financial Benefits
Here are five reasons to get started with real estate investing:
#1: Earn Income
Earn passive income or make this your living! With thorough research and a solid financial plan, you can make money in real estate investing. For those just starting, take advantage of free real estate investing resources to better educate yourself on strategies and the process.
#2: Diversify Your Investment Strategy
Diversification is a technique that reduces risk by allocating investments across various financial instruments or industries. The intent is to maximize returns by investing in multiple areas that would each react differently when any specific economic event occurs.
Most real estate investment professionals agree that, although it does not guarantee against loss, diversification is the most important component of reaching long-range financial goals while minimizing risk.
#3: Properties Appreciate in Value
Generally, the value of real estate properties will increase due to the increase in demand for property. As properties become more scarce, the price for your property will increase over the years.
An advantage of real estate investing is leverage. In real estate, leverage is the use of borrowed capital (debt) to increase the potential return on investment (ROI). Leverage occurs when a mortgage is used to reduce the amount of investor capital required to purchase a property. Leverage works best when the value of a property rises.
#5: High Tangible Asset Value
There will always be value in your land and the home or units you build. While some investments can decrease over time, homeowners insurance can help protect your real estate investment in the event of a worst-case scenario.
Commercial or Residential?
Deciding between commercial vs residential real estate investing is not a decision that can be made overnight.
When deciding between commercial vs residential investing, you need to weigh out who you are as an investor and what your goals are. Each type of investment property comes with an investment strategy that presents benefits and challenges that investors should be aware of before starting their investing.
Here are the distinct differences between commercial vs. residential investing:
What is Commercial Investing?
Technically speaking, what defines a commercial property is that it has five or more units. Under this definition, a multi-family real estate development with five or more units would be considered a commercial property. Other types of developments considered commercial investment properties may include office, retail, industrial, hotel, and special purpose buildings. Outside of large multi-family buildings, commercial properties are designed with the intention of attracting businesses instead of tenants.
As an investment strategy, commercial real estate investing tends to award a much wider range of potential investments compared to residential. Typically, there are more commercial property investment opportunities than residential ones, which can lead to commercial property investors investing in multiple projects.
What is Residential Investing?
Residential properties are properties that have 1-4 units – this includes single-family homes, condos, duplexes, and even quadruplexes. These properties are typically leased to families and individuals looking to rent or buy a home or unit within a building.
As an investor, there are typically not as many investment opportunities in residential properties. Because of this, residential real estate investors tend to have a more active role in the properties they choose to invest in.
Chris, Smart Real Estate Coach: For the new investor, I would not recommend commercial as that will entail more credibility, possibly borrowing from investors and/or borrowing from banks and putting down large deposits. On top of that, you’d start out your career by signing personally on loans. We suggest buying everything on TERMS – new and experienced, but especially new.
Choosing a Location to Invest
If you’re an investor, how should you pick an ideal location for your investment? There are many factors to consider. Here are some factors for you to consider:
Local vs. Remote:
The first consideration is whether or not you wish to invest close to your current location. There are many benefits to doing this – generally, it’s more efficient to have your real estate investment project to be local. Finding a project that is within driving distance can be helpful.
Suburbs Vs. City:
Another consideration for your investment strategy is whether to invest in real estate projects in the suburbs vs. urban location. Generally speaking, the suburbs can be a more affordable alternative for investors. With urban developments, the cost may increase more, but it can also yield a higher ROI.
Evaluate & Compare Markets:
Real estate markets play a big role in your investment. As an investor, do your due diligence and do a market analysis before deciding on locations to target for your real estate investment project. Here are a few things to consider when doing a real estate market evaluation:
- Job Growth
- Rent & Housing Trends
- Population Growth
- School Districts
- Transportation Options
- School Districts
Chris, Smart Real Estate Coach: “The way we buy and sell on TERMS there will always be enough business right in your own backyard. Whether an up or down or flat market, buying and selling on TERMS is the best way to maintain Recession Resistant”.
Choosing A Real Estate Investment Strategy
Determining an investment strategy that works for you will ultimately dictate what and where you invest in real estate. But what are your goals? Here are a few common investment strategies – and hopefully one of these strategies will line up with the type of investor you want to be:
- Strategy 1: Passive Income – Earn extra income, learn, and avoid losses
- Strategy 2: Aggressive Equity – Dramatically increase your savings rate by reducing expenses and/or increasing income
- Strategy 3: Slow-Build – Grow your smaller net worth into a much bigger net worth
- Strategy 4: Maximize ROI – Turn existing equity into investments that produce maximum income with minimal hassle and risk
Chris, Smart Real Estate Coach: There is no better way to get paid than getting 3 Paydays per deal you do. Our 3 Payday system provides immediate cash upfront, cash flow monthly, and long term wealth and cashouts. All over North America between our own deals and students’, those Paydays average $75,000 over 1-10 year terms. This is great for new investors.
How to Find Great Deals on Real Estate
To find good deals on real estate, it takes time and effort. With the proper amount of time, you can find that “hidden gem” in today’s competitive real estate market. Our advice is, you shouldn’t have to settle for paying market-price for a house. A great investment starts with price and taking the time to find a deal will be worth the endeavor.
Chris, Smart Real Estate Coach: When it comes to finding good deals local to you, be sure to utilize leads from Expired Listings, For Sale By Owner and For Rent By Owner.
We hope you enjoyed our real estate investing 101 guide. Investing in real estate has never been easier with crowdfunding. At EquityDoor, our goal is to connect real estate professionals with investors through our online real estate investment platform. Learn more about our real estate crowdfunding platform.