Real estate investment is a popular side hustle, and there is good reason for it. An experienced real estate investor can land huge cash windfalls with a single deal if they know what they are doing. But what about investing in rental property for beginners?
Everyone has to start somewhere. With all the different information that comes out of the real estate investing world, it can be overwhelming and discouraging. There is justifiable intimidation with the amount of money moving around in real estate markets, but there are good ways to get your foot in the door.
Know the essentials of investing in rental property for beginners
There are pros and cons to any investment strategy. Going all-in on one thing takes away from another opportunity. It is crucial to be clear on what risks you’re taking on when stepping into the real estate investment world.
There is lots of help out there
The real estate investment community is one of the most helpful and friendly communities out there. Of course, some are intense about the work and only want to help you if it puts money in their pocket. Still, Real Estate Investment Associations (REIAs) across the country are interested in working together to help everyone interested. Investors can often work together on deals, so there is no shying away from collaborations, and this can open up great opportunities for shortening your learning curve.
Any investment comes with risk
Investing on any level is a risk and reward game. The primary objective is to remove as much risk as possible to get as close to a sure thing as you can. With real estate investing, a lot of removing that risk comes with knowledge and experience. When you’re a beginner, there is more risk and, usually, less ability to withstand significant losses.
In real estate, this can be more prevalent. Some jobs look like a straightforward, easy win. Still, something can come out of nowhere to derail your entire project. Always have an exit strategy and do your best to be aware of what can go wrong.
Investing in rental property for beginners can involve multi-family homes
Many big-time real estate investors got their start as real estate agents. This gives them access to more information than the average real estate investor that doesn’t have the proper licensing. Spending time as an agent also gives you a better background in your neighborhoods so you can understand home values and desirable qualities.
One desirable quality for many investors is multi-family homes. These properties can lead to substantial monthly cash-flow when you have multiple families renting from you on a single property. You have to be wary of the headaches that can come along with being a landlord, and you could weigh that against the advantages and costs of using a property manager.
If you do this right, it can be a great way to get your real estate investing off to a quick start with some early cash flow.
Investing in rental property for beginners can involve distressed property
Flipping homes is not the only way to profit from distressed property. If you find a run-down property in a desirable location, rehabbing the property could be a great way to put a cash-cow rental property in your portfolio.
With a deal like this, the critical part of the process is in breaking down the numbers. You must be confident that the original investment and the monthly payments you’ll make down the road will be low enough to ensure that you’re making a profit on rent.
Even with that, if the location doesn’t regularly have people looking to rent (a college town could be ideal for this), you’ll be paying a mortgage on a vacant property. This type of deal would be perfect for a more experienced investor to work with you since it involves rehabbing a property and renting it out. Working with a partner can take a good chunk of your profit, but it is worth gaining the experience and lowering your risks.
What about real estate investing most interests you? What kind of investing are you planning to do?