Real estate prices have increased astronomically over the past half-century. In addition, the cost of rent continues to increase across the nationwide. If you haven’t invested in real estate yet, now is a great time to get started

Investing in real estate might seem like something only very wealthy people do, but it’s possible for anyone to be a successful real estate investor.

Real estate investing for beginners can be very intimidating, especially if you don’t know the industry. But with this real estate investing guide, it doesn’t have to be.

How Do You Make A Profit Investing in Real Estate?

When done correctly, real estate investment is a great way to make money. You can do it in a variety of different ways. Let’s take a look at six different ways to profit from real estate investing.

Appreciation

When the value of a piece of real estate increases over time it is called value appreciation. As a general rule, property values tend to increase over time. At present, the average appreciation rate in the U.S. is 14.5 percent.

This means you can buy a home, live in it, and expect that when you sell it the home will be worth more than you initially paid for it.

The number one factor in determining how well a piece of real estate will appreciate is to be aware of the desirability of its location. The more desirable the neighborhood, the more valuable the real estate.

As a general rule, it’s a better investment to buy the cheapest/worst house in a good neighborhood than a great house in a bad neighborhood. Figure out what will be the next up-and-coming area and invest before it pops.

Rental Income

Another way to grow your wealth through real estate investment is to use it as an income-generating rental property. When you rent your home, you earn a monthly income and the value of the home appreciates over time.

Ideally, the income you generate from renting your home will pay for your mortgage and turn some profit. Once you pay off the mortgage, the rental income will be all profit.

You always need to factor in maintenance and repairs as well. Eventually, the hot water tank will break, the basement will flood, or you’ll need a new roof.

In addition, you need to decide whether you will landlord the property yourself.

Ancillary Investments

Let’s say you’ve invested in commercial properties. On top of appreciation and rent, you can profit from doing something like placing vending machines on the property.

That way you can earn additional income from the vending machines.

Real Estate Investing Tips for Self Starters

It’s easy to make mistakes when you’re investing in real estate as a beginner. Here are some of the most important things to keep in mind as you get started.

Protect Yourself Legally

It is always a good idea to have legal protection from liability when you own a property. This is especially important if you rent your property out.

When you own property directly, you can be held liable for anything that happens on the property. For example, if a tenant gets injured, they can sue you. This can cause you to lose your personal assets.

A better idea is to hold the property in a limited liability company (LLC). This provides you with more legal protection should something terrible happen.

Keep in mind that opening an LLC doesn’t mean you’re automatically protected from all liability. Consult an experienced real estate attorney to determine your best options for legal protection.

Learn The Real Estate Market

If you’re planning to get involved in real estate investment you need to understand the real estate market. You also need to stay up-to-date with your market research.

The best place to start researching is the best place to start is right where you live, especially if you’re planning to landlord your own property.

Real Estate Investment Strategies

If you aren’t familiar with the real estate industry, getting your toes wet investing can be really intimidating. Honestly, it can take months to feel educated and confident enough to get in the game.

That’s why it’s such a great idea to start with some beginner-friendly strategies. The strategies we will discuss next are suitable for beginners and have the potential to be very profitable.

Wholesaling

Wholesaling is a strategy that places investors into the role of middleman between buyers and sellers.

First, a wholesaler buys a piece of property for a price under market value. Then they assign that real estate contract to an end buyer.

REIT Investing

A company that owns and manages a series of properties that generate income is called a real estate investment trust, or REIT. This type of company allows investors to buy shares of valuable real estate.

Prehabbing

Prehabbing is what happens when you resell a property for more than you invested by adding a few cost-effective cosmetic updates.

After making these minor improvements, the owner sells the property to an investor. The investor completes the full rehab the previous owner got started.

Real Estate Investing for Beginners

Real estate investing for beginners can be pretty intimidating if you aren’t confident you know what you’re doing. Do your market research, make sure to protect yourself legally, and proceed at the pace you feel comfortable.

There are many ways to make mistakes investing in real estate, but when done properly, it can lead to a very profitable investment over time.

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