Real Estate Investing for Beginners -101
Real Estate Investing for beginners:
When you begin to invest in real estate your goal must be to put your money to work hard for you passively and to make it grow so you have more money for the future.
Your real estate investment has to make you enough profit to cover the risk you take by covering all your costs like the taxes you pay, and all the other costs associated with owning the real estate investment such as utilities, insurance, property management, repair and maintenance.
It’s really simple once you understand the basics of the real estate investing game.
It really can be as simple as playing monopoly or Robert Kiyosakis Cashflow Game.
Your goal is to buy properties that generate passive income so that you can buy even more properties while avoiding bankruptcy. However simple as it sounds it doesn't mean it’s easy. If you make a mistake, you could find yourself broke or much worse.
Real Estate Investing For Beginners - Here are 4 Easy Ways Real Estate Investors can Make Money Investing.
There many ways you can make money investing in real estate. Here are four approaches to real estate investing for beginners:
• Real Estate Appreciation:
This is when the property becomes more valuable due to a change in the real estate market.
The land around your property becoming scarcer or busier such as a major shopping center going in next door but ideally a few blocks away, or upgrades you put into your real estate investment to make it more attractive to potential buyers or renters.
Real estate appreciation is a tricky game and is riskier than investing for cash flow.
• Cash Flow:
This type of real estate investment focuses on buying real estate such as an apartment building and operating it so you collect a stream of cash from a renter, which is the money a tenant pays you to use your property for a specific amount of time.
Cash flow can be generated from well-run storage units, apartment buildings, office buildings, strip malls, rental houses, or anything real estate that generates cash flow.
• Real Estate Related Income:
This is income generated by "specialists" in the real estate industry such as real estate brokers who make money through commissions from connecting an owner of a property that wants to sell with a buyer that wants to buy a property.
This could also be real estate management companies who get to keep a percentage of rents in exchange for running the day-to-day operations of a property.
For example I pay a Management Company 5% of the rental income of one of my apartment building for taking care of the day-to-day operations such as taking care of collecting the rents, leasing empty apartments to new residents, mowing the lawn, taking care of maintenance request and regular property maintenance.
• Ancillary Real Estate Investment Income:
For some real estate investments such as apartments and office buildings, this can be a huge source of profit.
Ancillary real estate investment income includes things like vending machines in office buildings or laundry facilities in apartments. In effect they are like a mini-business within a bigger real estate investment. They let you make money from a semi-captive collection of customers.
I wrote a real estate investing for beginners E-book:
Real Estate Investing For Beginners - Which Type of Real Estate Investment Should You Start With?
When you are ready to start the process of real estate investing, you will want to decide which of the real estate investment types is most appropriate for you.
Here are a few of the many different categories of real estate investment for you to consider that can earn you passive income:
• Residential real estate investments
Properties such as houses or apartment buildings or a townhouse or a vacation home where a person or family pays you to live in the property.
The length of their stay is based upon the rental agreement or the lease agreement. The net income after all the expenses including mortgage payment is passive income to you.
• Commercial real estate investments
Consist mostly of office buildings. If you were to buy a small building with individual offices with occupied units and a few vacant units you could lease these vacant units out to companies and small business owners who would pay you rent.
Again the net income after all expenses and mortgage payment is passive income to you.
• Industrial real estate investments
Consist of storage units or a single tenant warehouse or building. A building in which you find a Wal-Mart or a Home Depot are examples of an industrial buildings.
Industrial real estate investments often have significant benefits because the tenant pays for all the expenses so after your mortgage payment all the money left over is passive income to you.
• Retail real estate investments
Consist of shopping malls, strip malls, and other retail storefronts. In some cases the landlord also receives a percentage of sales generated by the tenant store in addition to a base rent to incentivize them to keep the property in top-notch condition.
Your expenses are very low and after your mortgage payment all the income is yours to keep.
• Mixed-use real estate investments
These combine any of the above categories into a single development. You generally will find shops like Quiznos, upscale men’s and women’s fashion retail shop, a virtual golf range, a hair salon or a membership gym.
Mixed-use real estate investments are popular for those with significant money to invest because they have a degree of built-in diversification which is important for controlling risk.
• Real Estate Investment Trusts or REITs
Trade like stocks and own a portfolio of underlying real estate. Some REITs invest in all the above and some specialize in one for example they only invest in residential Apartment building or others only invest in Commercial office building.
Understanding the differences, advantages, and drawbacks of REITs is very important and you must investigate all the pro’s and con’s of investing in REITs.
Related To Real Estate Investing for Beginners:
Real Estate Comparables - Learn How To Select Good Comparables
Real Estate Comparables part two: Formula For Comps
Learn How To Find a Great Real Estate Agent You Can Trust
Real Estate Negotition Tactics
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