Real estate investing is one of the fastest ways to gain returns. However, it can be slightly tricky to navigate the system and make the right choices. If you’re also just starting to invest in real estate and looking for some beginner-friendly tips, you’ve come to the right place.
Here we discuss everything you need to know about real estate investing and talk about some beginner-friendly investment strategies. In addition, we also shed light on some mistakes to steer clear of while investing in real estate. So, let’s get started.
What is Real Estate Investment?
Real estate investment is an investment that creates generational wealth and outperforms the stock market if done correctly. Investors generally own multiple pieces of real estate properties, which are used to generate profits through rental income and price appreciation.
How to Invest in Real Estate in India?
There are two ways in which you can build money through real estate investing in India.
Value Appreciation
Property values have historically increased over time, making real estate investment one of the very few sure-shot ways to gain long-term returns. One of the most important factors to consider while choosing a property for value appreciation is the location. Property prices tend to go up based on the desirability of the neighbourhood. You can also consider investing in an up-and-coming area.
Rental Income
Most real estate investments in India are made with an agenda to earn rental income. By renting out your property, you can earn double the returns in the form of rent as well as value appreciation. Rental income acts as an excellent supplement to your monthly income and can help enhance your savings as well.
Real Estate Investment Tips For Beginners
Also Read: ESG Investing
Be Aware Of the Costs
Buying properties will cost you quite a bit, but if you have enough funds or are willing to take a loan, it will prove to be worth it. However, there are a few additional costs involved as well, such as yearly upkeep and maintenance, utilities, taxes, etc. Everything has a cost, so make sure to consider every factor.
Choose the Property Type
Once you are sorted with your funds, next comes the step wherein you must decide which type of property you want to invest in. You can purchase property to rent out as an apartment or use it as an Airbnb. All of these things should be decided beforehand when you think about real estate investing.
Check Out the Location
One of the primary factors of real estate investment is the location, I.e., you would not want to buy a property that is low in price but is located in poor demography. It is important to check the market value, community, proximity to hospitals and shopping complexes, the neighbourhood, etc.
Buy Property with Growth in Mind
The majority of us invest in real estate with the idea of selling it one day. The goal is to sell it for more than what we have paid. Therefore, it is preferable to make certain upgrades and additions to your property in order to get a higher price in exchange for it. Make sure you invest your time and resources in building your investment strategy.
Also Read: What is Investment?
Different Ways of Investing in Real Estate
Real estate investment can be overwhelming for those not acquainted with the industry. It can take a long time to understand the nuances of this investment strategy and be able to make viable choices. However, there are a few beginner-friendly starting points for investors with little to no experience. Let’s look at them in detail.
Real Estate Wholesaling
Real estate wholesaling is one of the fastest ways to earn returns through real estate is through wholesaling. Both residential and commercial real estate investing can be included in real estate wholesaling. This unique strategy involves acquiring a property under market value and then assigning an end-buyer to re-purchase the contract. In other words, as a wholesaler, you wouldn’t actually own the property but would earn money by adding a fee to the final contract price.
The key to effective real estate wholesaling is developing a robust buyer network. It’s important to have a list of potential buyers and understand their investment objectives to reach out to them with the right opportunities.
What makes real estate wholesaling a viable option for beginners is that it doesn’t require significant capital to get started. While you might need to invest money in marketing or pay token amounts, but since you wouldn’t actually be acquiring property, you wouldn’t need to freeze a lot of money in order to invest. In addition, wholesaling also allows you to build a strong network and understand the market better.
Prehabbing
Another great real estate investment option for beginners is prehabbing. If you don’t know what prehabbing is, it can be best defined as improving the property without having to make any significant changes. In prehabbing, investors will enhance the visual appeal of a property, enough to entice other investors. This could include cleaning, painting, and landscaping the property to make it look visually appealing.
Investors looking to venture into this strategy should know that not all properties can be prehabbed. Look for properties that require minimal up-gradation and can be made to look presentable without a lot of effort or expenses.
Prehabbing is a great way for beginners to venture into real estate investing as it involves very little risk and minimal work. However, it’s important to remember that the aim of prehabbing is not to steak but to sizzle.
REIT Investing
Real Estate Investment Trusts offer an excellent starting point for those who’re new to real estate investing. Equity REITs are organisations that own income-generating real estate. Investors can acquire stakes in these properties and earn returns through regularly paid dividends. REITs are great for beginners who cannot pursue real estate investment but wish to generate a passive stream of revenue.
REITs are opted for by investors as a means to diversify their portfolios without having to invest large amounts of money. These investments are great for beginners as it lets them earn solid returns without any significant investment.
Rental Properties
Investing in rental properties is a great way to earn monthly income. It is an excellent method of ensuring fixed supplementary income and increasing your monthly savings as well. If you buy rental properties at the right time and at the right price, you will be able to get back the property price, maintenance, and registration costs all through rent.
While investing in rental properties, you can also consider rental hacking. This refers to occupying a portion of the house yourself while renting out the rest. This is a great option as it lets you qualify for a property loan even though you intend to earn income off of the property.
Why Real Estate Investment is Important?
Owning real estate has always been associated with wealth and status. However, it is important to know that real estate investing is also popular for its credibility, I.e., it is one of the safest ways of securing one’s wealth. Let’s look at a few of the many benefits of real estate investing.
- Appreciation of Value
The value of real estate has been increasing with time. Therefore, with a good investment, you can make an enormous profit. In other kinds of investments like the stock market, the risk of loss is inescapable. However, real estate investing offers significant control over one’s investment.
2. Tax Benefits
The tax deductions provided on real estate can reduce the overall taxes. The government also offers tax breaks for property depreciation, legal fees, maintenance and repair expenses, and insurance at the same time.
3. Cash Flow
Real estate investing provides an ability to generate cash flow. A steady rental income offers long-term financial security by working as an excellent incentive for passive income.
Real estate is easy to buy, gives tax benefits, is convenient to finance, and gives numerous more benefits. Hence, even today, real estate investing is one of the most beneficial investing options.
How Does Real Estate Investment Through REITs Work?
The major goal of the government behind initiating REITs is to augment public investment in the real estate sector. This becomes an amazing opportunity for investors because it allows them to generate profits from real estate investing without owning the property.
Key Takeaways
- Real estate is considered an independent asset class and is an essential part of a diversified portfolio
- Property renting is one of the most lucrative ways to make money through real estate
- Real Estate Investment Trusts are a great way to get real estate investment exposure without owning, operating or financing properties
Conclusion
Real estate has always been a highly lucrative investment vehicle for investors with different requirements and risk appetites. However, the complexities and the multi-faceted nature of this investment tool are what prevent beginners from venturing into real estate investment. Through this guide, we aim to simplify real estate investment for beginners and help them benefit from this excellent investment alternative.
Frequently Asked Questions
Some excellent real estate investment strategies for beginners include –
– Real estate wholesaling
– Prehabbing
– REIT investing
– Buying rental properties
The tax advantages of investing in real estate are numerous. However, becoming a rental property owner is arguably the simplest way to receive these benefits; however, it is far from the only way. When you rent a property, you can deduct a variety of expenses related to the common property, including but not limited to depreciation, repairs, interest, and taxes.
Most new property investors who ask such real estate questions are looking for a quick way to make money. Real estate investing can be a lucrative venture. However, it is unlikely to make you wealthy overnight or even within a few months. Before you can see big returns, you must not only work hard but also be patient. Your returns will also be affected by your strategy and market conditions.
The goal of owning income property is to maximize profits. Despite the fact that market conditions have a significant impact on property value, there are some factors you can control to increase the profitability of your investment. Here are some easy ways to boost your investment property’s profits:
– Set a competitive price
– To reduce unpaid rent and property damage, screen tenants
– Charge a fee for additional services
– Maintain the property to ensure it remains in good condition and to avoid costly repairs
– Renovations can help you improve your property
Even before you start looking for your first investment property, you should have enough capital. You should also try to learn everything you can about real estate investing. Attend seminars, purchase books, read real estate blogs, and so on.
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