You’ve likely heard that investing in real estate is a great way to make money and a common strategy of countless self-made millionaires. Still, you may have been reluctant to start investing in real estate because you’re intimidated by the apparent level of knowledge and expertise necessary to achieve good results in this area.
While it’s definitely true that investing in real estate with knowledge and experience is always going to beat investing in real estate without it, real estate investing is much more accessible and simpler than most people realize. In fact, it’s possible to start investing in real estate with little to no prior knowledge – as long as you’re willing to put in the work.
Major Caveats
There are some major caveats to this claim, of course. First, you’re going to need at least some cursory knowledge of real estate; if the concept of buying and managing real estate is completely foreign to you, there’s no way for you to make a competent decision. Second, investing without knowledge or experience is inherently risky; you should at least be financially savvy enough to calculate and consider risk before moving forward with any major investment decision.
We will attempt to compensate for these in our strategic speculation.
Finding Experts
Making money with real estate isn’t exactly easy, and no two real estate deals are equally valuable to the investor considering them. There are only two ways to successfully navigate this terrain.
First, you can spend years to decades building up your own knowledge so you become an expert. Second, and much more accessibly, you can work with people who have already put in that effort and rely on their expertise and guidance to make your own decisions – especially if those people are familiar with your local area.
For example, Fort Worth property management companies are usually fully staffed with property managers, real estate investors, contractors, and other experts who know the Fort Worth real estate market inside and out. You can work with them to find an agent to guide your strategy and eventually enlist their help in managing your rental property.
At the very least, you should have a real estate agent by your side. Your agent is your dedicated expert, and they’ll help you outline and better understand your own goals, then find a perfect property for your needs. They have a fiduciary duty to you, and as a buyer, an agent won’t cost you anything, so there’s practically no downside to this.
Choosing Your Strategy
Before you start contacting experts, however, it’s a good idea to think about what type of strategy you want to follow. There are many ways to get involved as a real estate investor, such as investing in commercial or residential properties, or investing in different areas. For many people, the best way to start is to invest in residential properties in your own city, since it’s going to be much more familiar territory to you.
- Primary residence. Your first real estate investment is probably going to be your primary residence, as it’s typically financially advantageous to buy instead of renting. You can also convert your primary residence into a rental property eventually, if and when you choose to move out.
- Rental property. Rental properties generate positive cash flow every month when selected and managed properly. They also benefit from ongoing appreciation, allowing them to make you money in multiple different ways
- Flipping. House flipping is the art of purchasing cheap and deteriorated homes, fixing them up, and immediately or nearly immediately selling them for a significant profit. Flipping houses is nowhere near as popular as it used to be, and for several reasons; it’s not a good place to start if you have no knowledge or experience.
Saving Up the Down Payment
One of the biggest financial challenges as a newcomer in the real estate world is saving up the down payment for your first property, whether it’s your primary residence or just a rental. Fortunately, you’ll only need about 5 percent of the purchase price of the property to get started.
If you’re struggling to save this up, consider picking up a side gig for extra income or cutting back on unnecessary expenses like entertainment subscriptions or restaurant meals. For a $100,000 home, you’ll only need a $5,000 down payment; if you save a mere $200 a month by cutting out unnecessary expenses, you’ll have that down payment saved in just two years.
REITs and Fractional Shares
If you don’t like the idea of buying a traditional property, you can invest in real estate through REITs and fractional shares. A real estate investment trust (REIT) is a company that owns and (usually) operates real estate on behalf of investors. You can buy and sell shares of REITs the same way you buy and sell shares of stocks; look for a REIT with a good investment plan and a competent team of leaders at the helm. To invest in real estate with fractional shares, you’ll need to find partners with a similar goal in mindset; look for people who have more knowledge and experience than you do to compensate for your own lack of expertise.
The Endless Journey of Real Estate Development
There is no limit to what you can learn and develop as a real estate investor; this is only the very beginning of your journey. Surround yourself with experts, keep an open mind, and continue making adjustments to improve your profitability.
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