The Beginner’s Guide to Real Estate Investing

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Historically, real estate has been a strong investment, offering substantial returns even during stock market fluctuations. For example, the average home sale price has nearly doubled from $259,700 in 2011 to $516,500 today. Residential homes are just one part of the bigger picture. As property values rise and generate steady passive income, investors can achieve immediate and long-term profits. Real estate investing is more accessible now, with options requiring less upfront capital than a typical down payment.

Real estate investing involves acquiring properties such as single-family homes, apartment complexes, and commercial real estate like restaurants or retail outlets. There are various ways to invest, ranging from purchasing properties to renting or selling, to fractional real estate investments.

Investing in real estate offers benefits like property appreciation, rental income, tax advantages, and reliable gains. Benefit from rising property values, earn monthly income from rentals, enjoy tax breaks like depreciation write-offs and repair cost deductions, and be taxed at a lower rate for capital gains. Real estate investment is generally considered a conservative strategy, as the housing market tends to trend upward over time.

Engage in real estate investing through direct acquisition of residential homes, multi-family homes, or commercial properties. Fractional real estate investments allow investors with lower capital to buy shares in properties, benefiting from increased property value and rental income.

Consider Real Estate Investment Trusts (REITs) that invest in properties and distribute dividends to investors. REITs can enjoy tax benefits and offer shares in the company or specific properties. Real estate mutual funds offer access to a diversified portfolio of real estate investments, primarily investing in REITs and property management companies.

Real estate investment groups are organizations focused on investing in real estate, purchasing and holding or renovating properties. Wholesalers act as intermediaries between buyers and sellers of real estate properties, facilitating quick sales.

Investing in real estate provides opportunities for profit and wealth building, catering to various investment preferences and capital availability.

Funding Your Real Estate Investments: Real Estate Platforms

If you need more capital for real estate investment, don’t worry! There are still viable options available. The first decision is whether to buy a property independently or opt for a managed investment through fractional real estate.

Direct Property Acquisition

For rental purposes, consider making a smaller initial investment with a 5% or 10% down payment. This works well if rental income covers all mortgage expenses and property taxes. Keep in mind that mortgage insurance may be required until a substantial portion of the loan is paid off. Reinvesting rental earnings into loan repayment can help reduce this cost.

Traditional Mortgages

Conventional mortgages generally have lower interest rates compared to personal loans. If you’re considering a property with steady rental income, you may qualify for a larger mortgage, especially if you plan to be an on-site landlord. Federal, state, or local programs may be available to help finance homeownership while using the property as both a primary residence and a source of rental income. Check with your local government for options.

Personal Loans

Personal loans are unsecured debts not tied to any specific asset. You may be eligible for a personal loan to cover the down payment on a property you plan to rent out. Keep in mind that while these loans are often easier to obtain than traditional mortgages, they are usually for smaller amounts and may have higher interest rates.

Remember that purchasing a home involves ongoing costs like homeowners insurance, taxes, and maintenance. Additionally, significant capital may be needed for property improvements, especially for fixer-uppers.

Fractional Real Estate Investments

For first-time real estate investors, fractional real estate platforms like Foothold can simplify the process. Browse available properties, invest as low as $100 or as high as $15,000 per property, and earn a proportional share of the monthly rental income. Plus, benefit from property appreciation.

Finding Your First Real Estate Investment Property

Getting into real estate investment may seem daunting at first, with many property types and markets to explore. Here are some tips:

The MLS

Start by exploring websites that aggregate listings from different agencies and MLSs, like Zillow.

Real Estate Agents

A real estate agent can make the process easier, providing access to tools and information. They can help navigate the local market, negotiate prices, and understand attractive home features for renters in the area.

Auctions

Banks often auction off foreclosed properties to the highest bidder. If participating in an auction, expect to pay a deposit upon winning the bid and settle the balance in cash within a few weeks. Find out about auctions through websites that specialize in foreclosure sales. Before committing to a purchase, conduct due diligence by researching nearby property values, historical changes, and average rental prices in the area.

Real estate platforms allow you to invest in properties together with other investors for shared gain.

Mistakes to Avoid When Investing in Real Estate

Although real estate investing offers significant long-term returns, it comes with risks. Consider these common pitfalls before diving into a seemingly great investment opportunity.

Avoid Partnering with the Wrong Person

While investing alone can be challenging and financially unfeasible for many, it’s crucial to avoid rushing into a partnership that may not work out. If you’re investing with someone else, make sure you know them well and thoroughly discuss how to handle unfavorable situations, such as market downturns or one party wanting to exit the investment.

Always have a clear contract that defines ownership and responsibilities. Even if you’re dealing with someone you’ve worked with before, people’s reactions to unexpected circumstances can be unpredictable. A clear contract provides protection for everyone involved.

Simplified Real Estate Investing with Foothold

Investing in rental properties is now a straightforward process thanks to platforms like Foothold. This crowdfunding medium simplifies the complexities of real estate investments. The platform allows you to fractionally invest in vacation rentals, generate income from rent, accrue equity via property value appreciation, and leave the rest to us. 

The viewpoints shared in this article should be considered as general information only, not as specific advice or recommendations for any individual or any particular security or investment product. Please note that these views can change without any notice. Please see Foothold’s disclaimers for more information.

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