Property Investment Strategies for Beginners
Entering the real estate industry can be very overwhelming. There are many different paths to take and different parts of the industry that you can invest in.
You do not need a real estate license to invest in real estate, but having a license can increase profit margins.
Wholesale Strategy
Begin By Wholesaling
One of the best ways to dip your toes into real estate is through wholesaling. You do not need capital for wholesale investments, just time to invest in finding houses for sale and buyers. As a wholesaler, you need to find a property for sale, create a contract from the seller, find a buyer, and assign a contract to the buyer. The process only takes a few days and sometimes a week. However, even if your only investment is time, you still can walk away with a few thousand dollar return.
Flipping Strategy
Fix and Flip
The fix and flip strategy is another is great for short term investments. It requires more capital, time, knowledge and market values.
The key to fix and flips is finding a house that is below market value and has the potential for property value increases with minor fixes by the investor before putting the house back on the market for resale. The profit in the investment is the difference between your purchase price and cost to fix and sale price.
This strategy is good for beginners because it allows them to test themselves and see if they like making real estate investments without having to commit to a long-term investment and mortgage with the potential for little to no return.
Even though fix and flips are possible without a real estate license, having a license will make the process easier as you will have more intel and access to the market and a better connection to contractors and other personnel in the industry. They will be more willing to give you discounts and deals if you show commitment to your investments with a license. Cheaper contractors mean a larger return on the investment.
Buy and Hold Strategies
Long Term Real Estate Investments to Buy-and-Hold
Buying and holding is one of the long-term real estate investment strategies. Buying and holding is a potential choice for beginners because it doesn’t hinge upon quick turnover and fast deals. The investor must be willing to wait multiple years while holding onto the property until market prices raise high enough for the investor to be satisfied with a sale and return.
The theory behind this strategy is that the real estate property will appreciate naturally as the market changes and time passes. One of the biggest positives of this strategy is that theoretically, it is one of the most passive forms of real estate investments.
Renting during your holding time
If you decide to take a long term approach and buy and hold the property, it is possible to create additional return on the investment through renting. You will be able to make money off of the property once you are able to sign a contract with a tenant. The rental income will help supplement real estate commissions during the holding time and the rental income can even help pay the mortgage during the holding time as well. In addition, realtors know the local market well, and you know where there is demand for housing so you will be able to find a profitable rental property to invest in.
There are various types of properties that are great for buy-and-hold investments:
- apartment buildings
- commercial real estate
- multi-family properties
- single family rental properties
- vacation rentals
Pick your Strategy
Investing in real estate is a great way to make money. Choose the investment strategies that is the right for you and to start making money as a property investor.