There’s a lot more to buying a real estate property than having a home. The real estate market is an investment market. Whether you’re a first-time homebuyer or a real estate investor, you must think of your purchase as an investment decision and assess it objectively. Real estate investing has become one of the safest ways to get a substantial cash flow into the real estate investor’s pockets. Buying an investment property may not be for everyone, but when well-equipped with knowledge and practical experience anyone can make it in this sector. New real estate investors are afraid of taking the first step and being their own boss at their own real estate business simply because they don’t know how to invest in real estate or how to invest money in general.
Knowing how to invest money you have in the right properties can significantly change your financial situation. To keep things simple for beginner real estate investors, here are a few concrete methods of how to invest money in real estate:
Rental Properties
Owning rental properties is an old approach that, to this day, still works. Knowing how to invest money in rental properties can drastically affect a real estate investor’s rental income. Rental properties can be either long-term rentals (usually houses or apartments) or short-term rentals (also known as Airbnb rentals). In a typical case of rental properties, the owner purchases a property and finds a proper tenant to rent it. A real estate investor who owns rental properties is expected to be well-organized as he/she will need to pay mortgages, manage taxes, and perform maintenance on the investment property to keep it in tip-top condition.
Making sure that you are charging enough for rent to cover all costs of the investment property and turning a profit requires the landlord to calculate such expenses prior to even showing the property to potential tenants.
Another major thing that landlords must deal with is finding proper tenants. This may seem simple enough in theory, but in reality, it takes a whole lot of time and thorough investigating to find proper tenants. Real estate investors must perform background checks and even credit checks to make sure they are getting a proper tenant. Some landlords require tenants to provide previous landlord references; this can give you more insight into the rental history of the potential tenant and if he/she takes good care of their rental properties.
Related: Investing in Real Estate: Long-term Rental Properties Vs. Short-Term Rentals
REITs
A REIT is the sweet love child of the real estate market and the stock market. REITs are short for Real Estate Investment Trusts. REITs are corporations that use investors’ money to buy income properties and manage them.
REITs are becoming very popular, especially for investors who are interested in the stock market-type of investment. Knowing how to invest money in REITs can be intimidating at first as it is very similar to investing in the stock market.
Related: Why a Property Investment is More Profitable than Stocks
Fix-and-flips
Real estate investors who are acquainted with construction know just how to invest money in real estate. Fix-and-flips are the ideal investment choice for contractors and construction business men. House-flipping is an ideal investment choice for most people as it employs the idea of getting out of the investment property as fast as possible. This works by buying a property that’s a bit under the weather, giving it a makeover as inexpensive as possible, then reselling it for profit.
This may not be the best investment decision for new real estate investors mainly because it holds great risk if calculations are not done right. A house flipper must calculate all costs prior to purchasing the property to evaluate the viability of his/her investment. Most successful real estate investors advise new real estate investors to partner with experienced individuals like contractors to lessen the risk of such investments.
Related: 5 tricks to Save on Fix-and-flips.
List a Room in Your House on Airbnb
This method requires the smallest investment on the property owner’s behalf. Without knowing how to invest money in real estate, any current homeowner can rent out a room in their house for extra income. Doing such a thing can be of great benefit to the homeowner as it can spare him/her the troubles of financing investment properties.
How to Invest Money in the Best Real Estate Investments
Before a new real estate investor can make any financial decision in real estate, he/she must be equipped with the right tools to make informed decisions. An investment property analysis can help real estate investors analyze all aspects when it comes to an investment property, especially in residential real estate. This is mainly because investors prefer knowing all aspects of their investments, including the return on investment and cash on cash return. Mashvisor offers a comprehensive investment property analysis and a heat map analysis. A heat map analysis is a combination of a mapping tool that’s designed to run a comparative market analysis to help real estate investors find the best investment properties.
Technology has made such tools available to variations of investors: you can be a beginner real estate investor or an experienced one and still find the information provided by investment property analysis beneficial.
Related: Investment Property Analysis: Real Estate Investing
To Conclude
Real estate investing requires investors to come up with creative solutions to their properties’ problems in order to be making money in real estate. Knowing how to invest money in real estate requires real estate investors to educate themselves and never stop learning the new trends and market ventures. It can be a sharp learning curve for beginner real estate investors as they lack a certain type of experience in the field. There is no difference between investing $500 in real estate or investing $500 in the stock market if the entrepreneur knows how to invest money in the field, and stays educated and updated about the market he/she is in.
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