There is no doubt that real estate investing creates a path to wealth and resources. Though there are plenty of strategies and opportunities for getting started in this business, some of which are better for novices than others. For instance, flipping houses is a profitable investment strategy, but it is not recommended for beginner investors. This is because it is a high-risk investment that requires significant knowledge, huge capital, and experience in the real estate market. Rather, here are seven investment strategies that are considered the best ways to make money in real estate for beginners:
1. Invest in Single-Family Homes
One of the most basic methods for making money in real estate is to invest in long-term residential rentals. The fact is, people will always need a place to live in, simple and plain. Though, due to increasing prices of houses for mortgage interest rates and sales, people perceive that renting makes more financial sense. This makes getting associated with residential rental properties, to be considered as a smart investment strategy.
For beginner’s real estate investors, it is best to invest in single-family houses as opposed to multi-family houses. While multi-family houses are also one of the most significant ways to make money in real estate, investing in them needs experience and large capital, which you, as a beginner in the housing market, probably do not have. On the other hand, single-family houses are easier to maintain, manage, and buy.
Furthermore, single-family houses also have a higher chance of generating positive cash flow and appreciate faster than other property types. Residents of these rental properties also stay for the long-term and usually take good care of the property and treat it like their own house. You need to remember that you need to do the proper amount of due diligence to search for a profitable rental property in a prominent location.
2. Investment in Turnkey Properties
Turnkey real estate is an investment tactic through which a real estate investor purchases a property that is owned by any company. This company might have already applied the necessary improvements and will have the property ready to rent. Plus, these companies may also offer property management services. Any novice investor with small down payment and sufficient credit can invest in these properties.
As you already notice, investing in turnkey properties is one of the most excellent strategies for beginner investors. They are more relaxed to finance, manage, and can immediately start making money. Majority real estate investors go for this way of investing in real estate because it enables them to minimize the money and time put into property investment. Hence, turnkey rental properties allow an investor to receive passive income, enabling them to make money in real estate investing for beginners.
3. Try House Hacking
One of the most reliable and best ways to make money in real estate is by house hacking. This is a reasonably easy investment strategy that involves purchasing a primary residence and renting out parts of it. Ideally, you will want to buy a multi-family home like a duplex, triplex, fourplex so you can live in one unit and rent out the rest to collect passive rental income, which goes towards paying off your expenses. Actually, you will be living in your house for free.
Smart beginner real estate investors also use home hacking to bring in additional income and save it for a down payment on another investment property. Consequently, this investment strategy not only allows you to make checks but is also an excellent way to build your real estate portfolio. Moreover, since you will technically be a landlord, house hacking lets you gain experience with property management, and what it is like to own a rental property.
4. Invest in Real Estate Investment Trusts
One of the many advantages of investing in real estate is that there are methods to make money without actually owning an investment property. So, if you do not have the capital to buy a home, there are other investment approaches you can try. One of the best approaches to make money in real estate without property ownership is investing your capital in a real estate investment trust (REIT). This strategy is quite similar to investing in stocks or mutual funds.
A real estate investment trust (REIT) pools money from investors to invest it in several income-producing real estate properties. Those can be large hotels, apartment buildings, office buildings, retail space, commercial real estate, etc. This way, you invest in the real estate sector as a shareholder rather than as an investor owning these properties. In return, the real estate investment trust (REIT) pays you dividends, which gives this investment strategy an excellent way to make passive income in real estate. You will make money without having to worry about maintaining the properties, locating tenants, or any other responsibilities that landlords are responsible for.
5. Manage Real Estate Properties
If you are not interested in owning a rental property, another great way to make money in real estate is to start your own property management business. There are several property investors who, for one reason or another, struggle with managing their investments. Perhaps they still want to keep their full-time job, and maybe they are purchasing real estate properties out-of-state, etc. These investors would pay a handsome amount of money for a property manager to do the job for them (typically 9-10 percent of each month’s rental income).
Also, since many prefer to rent instead of own their house, the rental market is strong. This meant that the market for professional property management has never been better, and it could be a profitable area to get involved in. This is also a good idea if you are hoping to own your own rental properties one day, as you will learn the most effective practices to manage real estate properties.
6. Lend Money to Other Investors
The last investment strategy that is regarded as one of the best ways to make money in real estate without having to own property is to become a lender. Now, this needs you to have some capital. Hard money lenders give short-term loans to property investors who cannot qualify for a mortgage. This might not be the first investment strategy that comes to mind when considering how to begin making money in real estate. Though it is an excellent way to develop your network, capital, and receive a high return on investment.
Even if you do not have a considerable amount of capital, you can quickly locate investors looking to finance their investments with hard money loans. Though, as long as you successfully identify the right deals and provide an amount of money, you will have a high success rate. Furthermore, these loans usually have higher interest rate, which makes sense regarding the higher risk. These are also considered a short-term loan, which means you could collect your rewards without having to wait years and years for returns.