Real Estate Investing: 5 Proven Strategies to Get Started Today
Real estate investing is unlike any other investment medium. With exceptional tax breaks, cash flow potential, appreciation, and tangibility, real estate investments are one of the most effective ways to diversify your portfolio with assets that you can actually use. At the same time, navigating the complexities of real estate investing can be daunting, oftentimes discouraging prospective investors from taking the leap. Fortunately, our Stone 2 Stone Solutions Inc. team has created the following blog post to help guide your real estate endeavors with actionable insight to help get you started!
Rental Property Investment
Rental properties have the potential to generate significant cash flow for investors. In principle, rental property owners can virtually pay off their mortgage by collecting monthly payments from tenants. At the same time, several rental properties may be required in order to generate enough income for sustainable living. Additionally, many investors don’t have the up-front capital required to purchase multiple rentals at once.
Fortunately, homeowners can start their rental property investment endeavors by taking a slightly different approach: living in the property that they’re renting. After all, everyone needs a place to live (unless you’re a ‘Van Life’ participant). By occupying your rental property with tenants inside, you’ll not only qualify for a residential loan, but also be on-site to manage any issues. You can also still hire a property manager to assist in day-to-day repairs or trouble calls in the event that you’re not a handy person. In time, you’ll have a strong foundational knowledge of the nuances related to property management, providing you with increased confidence as you progress to your second rental property.
REITs
For individuals who wish to avoid actually owning physical property, Real Estate Investment Trusts (REITs) are a viable option. These investments can be handled entirely online, providing you with access to the upsides of real estate capital gains with the added bonus of dividends.
Fortunately, REITs can be accessed directly through most online brokerage accounts. To get started, investors can go online, link their bank account, and begin trading (similar to standard stock or mutual fund investments). At the same time, selecting the right REITs requires thorough research and planning. First, understand whether the REITs you’re considering directly invest into properties or invest in mortgage-backed securities. Next, seek out dividend yield rates and historical returns compared to the U.S. real estate market as a whole. Lastly, pay attention to the actual assets, property managers, properties, and tenants that are involved in the REITs. You can also seek out expert opinions to validate your assessment (most brokerage platforms have built-in expert ratings). The more you know, the more likely you’ll be able to select REITs that meet your goals and desired returns.
House Flipping
In principle, house flipping is quite simple. Purchase a “fixer-upper”, do the leg work, and resell the property for more than you bought it for. In practice, however, novice mistakes can turn would-be profitable house flipping endeavors into nightmares. Unless you’ve been in the real estate market for years, forging the expert connections you’ll need to conduct a successful flip can be daunting.
As with any business endeavor, securing a worthwhile initial price is critical. You’ll need to have reserved cash for repairs, and so understanding the potential resale volume of a property is a prerequisite to purchasing. To facilitate your efforts, seek out an experienced real estate agent who thoroughly understands your goals. Next, reach out to local contractors to help determine project costs. Lastly, draft a business plan that can be presented to prospective investors (unless you plan to self-fund your endeavor). Once you’ve field-tested your team (agent, contractor, and lender), you’ll be in a better position for follow-on house flipping.
C2C Renting
With countless apps and sites dedicated to renting out spaces, rooms, and even entire homes, the process of consumer-to-consumer (C2C) renting has been completely normalized within the past decade. This practice enables property owners to begin their real estate investing ventures in new and innovative ways.
Instead of taking out loans or risking your savings, C2C renting enables homeowners to leverage what they already own to make additional capital. Beginning is as easy as signing up for one of the many rental apps or websites, taking photos of the room (or home) in question, listing available dates, and setting prices. Verified reviews are an integral part of securing future guests, which is why setting discounted pricing early-on may be a viable entry strategy as you build your reputation. Over time, you’ll have the credibility to increase your pricing, boosting your cash flow in the process. As an additional consideration, you might consider combining your rental property with C2C renting for a more robust and flexible real estate investing solution.
Crowdfunding Properties
Crowdfunding has gained newfound appeal as micro-investors are able to pool their resources to fund large, commercial purchases. This method of real estate investing not only enables investors to partake in larger-scale investments, but also combines a diverse range of skills and experiences to facilitate a more knowledgeable investment network.
Investors can kickstart their real estate crowdfunding endeavors by signing up for one of the many intuitive platforms available online today. This is an especially beneficial undertaking for beginners, as the experiences and lessons learned from crowdfunded projects are worth their weight in gold. As a result, investors have newly established credentials that can take their real estate investment careers to new heights.
Closing Remarks
The passive income, potential capital gains, and asset-backed security associated with real estate investing have the potential to turn real estate investments into income-replacing revenue streams. Although taking the first step can be daunting, rental properties, REITs, house flipping, C2C renting, and crowdfunding are a few of the best ways to get started. The more time you spend within the industry, the more comfortable and confident you will become with follow-on deals, purchases, and acquisitions. If you need assistance, Stone 2 Stone Solutions Inc. provides exceptional property management solutions and strategic analysis for clients.
Thank you for reading, and we wish you the best of luck with your real estate investing efforts. We would love to hear from you! For any questions, comments, or concerns, please feel free to reach out via our contact us page. We look forward to hearing from you!
~Avriel