Table of Contents Hide
- Why Consider Real Estate Investing
- 15 Real Estate Investing Strategies For Beginners?
- #1. Wholesaling
- #2. Pre-habbing
- #3. REIT Investing
- #4. House Hacking
- #5. Live-In House Flips
- #6. Real Estate Crowdfunding
- #7. Airbnb
- #8. Live-In-Then-Rent
- #9. Partnerships
- #10. Real Estate Agent
- #11. Investing in Long-Term Rental Properties
- #12. Buy and Hold
- #13. Seller Financing
- #14. BRRRR Strategy
- #15. Sniff Out Deals For Others
You make big money when you make the right investment that can yield handsome returns. Though many ways of investing exist, Real Estate Investment tops the chart because of its unique strategies.
Read this article to learn about Real Estate Investing for Beginners’ strategies and how you can use them.
According to Franchise Help in 2019, there were approximately 210,000 companies operating in the residential brokerage and management field, generated $200 billion in revenue.
So, with any investment, it’s better to be well-versed before diving in with hundreds of thousands of dollars as beginners.
In this article, you will see the 15 real estate businesses you can invest in as beginners in 2022. Stay put. But before that, you can navigate through the table of content below to get an overview.
Why Consider Real Estate Investing
Real estate is an ideal investment that has many benefits. When you invest in real estate, you make money from income, depreciation, equity build-up, appreciation, and leverage.
The good thing is that real estate investing is a combination of small business and pure investment. Though it is difficult, it is good to start and grow a real estate investment from the scratch.
Once your business matures, you’ll live off your investment income for the remaining days of your life. That means work becomes optional and you can do what matters most or what you love with your time.
15 Real Estate Investing Strategies For Beginners?
Here are the real estate investment strategies for beginners to use for a start
Wholesaling is one of the fastest ways to get started in real estate. This unique strategy allows investors to act as middlemen between sellers and buyers.
These sets of investors will identify and secure a property under market value and then assign that contract to an end buyer. They make money by adding a fee to the last contract.
The major job of wholesaling is to create a strong buyer list and the way they go about identifying strong buyers is to market their businesses through emails, social media, direct mail, and building a list of interested investors.
Furthermore, the reason wholesaling is great for real estate investing for beginners is that it does not require significant capital to get started.
This business allows investors to build a reliable network and form a strong understanding of their market area.
You can read this: Best Property Management Companies in the U.S
Prehabbing is another great option for beginning real estate investment. Unlike a rehab that needs funds to make significant improvements. A prehab project only requires minimal upgrades.
Hence, this is positioning a property for resale by adding minor cosmetic updates like cleaning, painting, or landscaping. Most times, they sell the property to an investor who will complete a full rehab.
Remember, the aim of pre-habbing is learning how to sell the sizzle, not the steak.
#3. REIT Investing
Real estate investment trusts (REITs) are good jump-off points for those real estate beginners. Equity REITs which are the foremost common type are companies that own income-generating land.
A real estate investment company (REIT) may be a company that owns and manages income-producing properties.
Investors can then purchase shares in REIT and enjoy the profitability of land without owning physical properties.
Furthermore, REITs are well suited towards beginners because they allow investors who may not be ready or able to purchase properties the chance to benefit from real estate.
#4. House Hacking
House Hacking is one of the best ways of investment in real estate as a beginner. Which basically means you will have to find out a way to generate a rental from your home.
A house hack is living in a small multi-unit property, like a duplex, triplex, or 4-plex. Then you rent out the extra units for income.
Like renting out the extra bedrooms to roommates, renting out a basement apartment, or renting extra space on your lot to an RV (if your local laws allow it).
In order to achieve this, you will need a little money because you can get owner-occupant financing to buy the property.
Below are a few loan programs with small down payments that you can use for house hacking:
- FHA loan (3.5% down)
- VA loan (0% down for veterans)
- USDA (0% down in rural areas)
- Conventional loans (3% to 10% down with mortgage insurance)
#5. Live-In House Flips
Live-In House Flips is one of the best ways to get started with flipping by turning your house into a flip. It takes advantage of one of the most profitable tax laws in the U.S.
This kind of strategy works by buying a home and living there for at least 2 out of 5 years.
Then you can sell the home for a profit and pay no taxes up to $250,000 as an individual or $500,000 as a couple who files taxes jointly.
So, like other strategies, it doesn’t come without some work and risk. But because you live in the house, you can reduce your risk by taking your time with repairs and waiting for the perfect time to sell.
#6. Real Estate Crowdfunding
Real estate crowdfunding is a new entry into the real estate investing world. It allows you to invest a smaller amount of money (like $1,000 to $5,000) alongside a group of other investors which is the crowd.
These crowdfunded investments can be rental properties (usually larger multi-unit properties) or loans to other real estate investors (i.e. hard money loans).
So with this kind of strategy, you must be an accredited investor in order to invest.
This means you must have a net worth exceeding $1 million (without your home) and/or an annual income of over $200,000 for the last two years (or $300,000 for a couple).
There are other crowdfunding platforms like Fundrise.com that do not require you to be accredited but are slightly different.
Airbnb is the mega-online marketplace that lets you rent out your home (or part of your home) for short periods of time. Also, you can use it as a low-cost way to get into real estate investing.
For most people, this strategy could be a specialized form of house hacking where you generate income from your home or part of your home.
But you could also grow it into a proper business that generates a part-time or full-time income.
The live-In-Then-Rent technique is related to house hacking. In essence, you move in into a house, get it ready to rent, and then keep it as a rental when you move out.
To make this strategy possible, you’ll need to buy a more economical house that will also work financially as a rental.
For Live-In-Then-Rent, you don’t have to live next door with your tenant unlike house hacking where you can benefit from the small-down-payment loans for owner-occupants
In other words, doing just 2 to 4 Live-In-Then-Rent properties can set you up with a nice portfolio of rentals for many years to come.
You can also check out this: Top 20 real estate moguls in the World
Partnerships is also one of the best strategy for real estate investing for beginners
This kind of strategy is when you don’t have the money yourself for a real estate investment, you can still get started by using money from a partner.
Although there are many ways to partner, one of the simplest ways is called a credit partnership which basically works like this:
- Finding a good real estate investing deal.
- Your credit partner puts up the down payment and gets a loan to buy the property
- You lease the property from your credit partner with an option to buy it at a higher price.
- Also, you sublease the property to a tenant, handle all the day-to-day management issues, and keep the difference between the rent you collect and the rent you pay.
- Before your option to purchase expires, you can get a new loan to purchase the property yourself (hopefully after the property has appreciated in value). Or you could sell your interest in the property to a new buyer at a marked-up price.
In essence, you can control the income and the appreciation of the property with very little money (like a $100 to $1,000 option fee), with the help of your brain and your hustle to put a deal together.
#10. Real Estate Agent
You could start a side business or full-time career as a real estate agent to start learning and earning money.
Every state is a little different, but you typically have to take a certain number of classes ahead. Then you take a complete test and pay your licensing dues with the state.
In addition, you need to find any broker office, whom you are comfortable with to “hang your license”
You can also join the local association of Realtors and pay for access to the Multiple Listing Service as most agents do.
Finally, you’ll need to invest extra time and energy into lead generation marketing to make some money.
#11. Investing in Long-Term Rental Properties
Getting an investment property and renting it on a long-term basis has been and remains one of the best ways in making money in real estate.
One of the most important benefits of traditional rentals is that an investor gets to make money both in the short-run (through rental income) and in the long haul (through real estate appreciation).
More so, long-term rentals provide a more stable source of income in addition to a lower turnover rate and require less management and maintenance than short-term rental properties.
#12. Buy and Hold
Buy and Hold is one of the most popular real estate investment strategies which is appropriate for beginners.
This strategy involves buying a real estate property and holding on to it in the long term until real appreciation has pushed its value enough to make sense to sell it.
A successful plan with this real estate strategy is to buy a property below market value or in a cold market which is expected to heat up in the coming years.
So this will help speed up appreciation and allow you to make money sooner rather than later.
#13. Seller Financing
Seller Financing is one of the strategy of real estate investing for beginners and a way of buying real estate where the seller can “become the bank” for you.
Instead of getting a loan from the bank, the seller can agree for you to purchase the property over time and pay gradually (like monthly installment).
Note that whatever terms you negotiate with the seller are what you pay. It doesn’t happen always but it is possible that you can negotiate a lower down payment with a seller.
This mostly happens if the property needs repairs because you can trade your labor sometime instead of making a monetary down payment.
#14. BRRRR Strategy
BRRRR stands for Buy, Remodel, Rent, Refinance, Repeat.
This strategy is all about buying fixer-upper properties, remodeling them, and increasing their value.
But you keep the property as a rental and refinance to pull out some or all of your cash, instead of selling.
Also, instead of running out of cash for upfront costs on various properties, you can carefully refinance to pull out your cash and recycle the funds to buy several properties in a row.
Here is how the process works
- B–Buy a property that has the potential to increase its value with repairs. Normally you’ll use short-term purchase financing, like cash, a line of credit, private money, or hard money.
- R-Remodel the property to increase its value and make it rentable
- R–Rent the property to a quality tenant (or tenants)
- R–Refinance using a long-term mortgage
- R–Repeat (if desired)
This technique has been used for a long time and is still using by many investors. So you can check out if you find this strategy interesting.
You also read this: Best Income Producing Assets You Should go for
#15. Sniff Out Deals For Others
Sniff out deals for others is by finding good real estate deals for another more experienced investor. This kind of strategy doesn’t need much money or experience to get started.
In most cases, you will need to have your real estate license, in order to lawfully earn the finder’s fees as a bird dog.
This is really a specialized form of being a real estate agent. So you just need to focus on investor buyers, instead of focusing on all buyers.
This strategy is very simple in principle. You just need to do two things very well: find good deals and find several active investor buyers with money.
Real estate has proven to be a successful investment from time to time. No matter where you are starting from there is no reason real estate should be restricted.
There are various investment strategies that can help you into a successful long-term career in real estate.
So take your time to learn about the real estate investing for beginners that are put down in this article and find the right strategy that best suits you.