How to Invest In Real Estate: Important Investment Tips for Beginners

Investing

11/29/2021

3 min. read

By: FCU Team

Building a side hustle with real estate investments can help you grow your income in more ways than one, but finding a starting point can feel like a shot in the dark. If you’re looking for a guide on what to know about real estate and how to start, we’ve got you covered. Check out our tips for beginners and find out if it’s right for you.

Take the First Steps Toward Real Estate Investments

Rent Out a Room

If your budget isn’t enough to buy and flip a home, renting out a bedroom in your home is a smaller-scale start with similar responsibilities. If your guest bedroom is collecting dust or being used as a storage space, you can make use of this neglected real estate for some profit.
 

A spare bedroom can make a great private rental on third-party sites like Airbnb. Renting out a room is much more accessible than purchasing property, and it can help you gauge the time and money needed to do it on a larger scale. Here are some pointers to help you get started and what you should know before you rent out a room.

REIT Investing

There are many ways you can dip your toes in real-estate waters without buying property. Real estate investment trusts, also known as REITs, are a good starting point if you’re new to the field. Equity REITs are the most common form of REITs, which are companies that own income-generating real estate and pay dividends out to investors who purchase shares.
 

This is great for beginners who aren’t quite ready for the responsibility of managing property but still want to generate a steady, passive income. Similar to investing in stocks, REITs actually tend to pay above-average returns. Before you get started, do a little research or talk to an advisor to find the right REIT for you.

Real Estate Prehabbing

As mentioned earlier, it doesn’t take a whole-house transformation to start your real estate journey. Unlike a real estate “rehab,” which involves complete renovations, a “prehab” project only requires small improvements for a refreshed look. Some prehab projects might include:

  • Painting: A fresh paint job, either interior or exterior, is an affordable way to enhance the appearance of a home.
  • Landscaping: Homebuyers are often guilty of judging a book by its cover. Curb appeal is impactful in real estate and can further entice buyers or renters.
  • Cleaning: A quick cleanup of the property can go a long way. Take the time to deep clean the unit for a higher chance of selling.  

Three Pointers Before Investing in Big Real Estate Property

Set Property Goals

Once you feel ready to invest in bigger real estate, the first step is to figure out what type of property you want to invest in. Property rentals can range from commercial and residential to vacation rentals. Each type of rental requires a different level of responsibility, so be sure to choose one that fits your availability.
 

If you feel like a long-term rental like a residential property calls for too much time, then consider flipping houses and selling them for a quicker return on investment. Even though house flipping can rack up expenses, the return can be far greater than the time and money put into it.  

Buy Property with Potential

Your first property becomes your baby. You’ll nurture it and watch it grow into something beautiful. Whether you choose to flip it quickly or take your time, just remember that the end goal is to always build towards a profit.
 

Property upgrades doesn’t necessarily mean you have to go HGTV style and transform a rundown shack into a modern masterpiece. Sometimes, simple touch-ups are all it takes to increase the value of a property. Know the area you’re interested in and take on only as much as you can handle. The more comfortable you get managing one property, the more likely you are to expand your reach and build your income.  

Understand Your Budget and Expenses

While real estate investment offers big rewards, understand that it can be an expensive process. If you’re just starting out on your real estate journey, make sure you have enough money in the bank to cover some of the sneaky expenses that come with owning and renting property that include yearly upkeep, utilities, renovations, taxes and other maintenance costs. By spending a little time crunching the numbers, you can feel confident about your budget before diving into the real estate game. Whether you’re taking out a loan or using your hard-earned savings to start, take all possible expenses into account so you manage your money accordingly.
 

Are you ready to invest and watch your money grow? Get started with small steps and work your way up to the big bucks. Create an investment plan or learn more about our mortgage services to kickstart your real estate journey today.