Investing in Real Estate for Beginners
Estimated reading time: 3 minutes.
The real estate market has many opportunities for investors to generate great returns. Investing in property enables you to live a more privileged lifestyle than if you didn't invest.
According to our research, real estate investors can make about 13% annual returns. That sounds like a very attractive incentive to invest in real estate, right?
In this article, we will guide you on what real estate investing is, and some other key facts.
First, let's be familiar with some basics;
What is real estate?
Real estate can be easily described as any land or property, but there are different types you should be aware of.
- Residential property
- The property we use for our residences such as a family house, cooperative housing, and others.
- Commercial real estate
- Commercial real estate entails land and buildings that are used for business-related purposes. The grocery store, a restaurant, and an office are all examples of commercial properties.
- Industrial real estate
- Industrial Real Estate is a term used for the land or buildings used for manufacturing or producing goods. Factories, warehouses, and other properties that fit this description are often called Industrial Real Estate.
- Some examples of land include farm land, vacant land, agricultural land, and more.
What is real estate investing?
Real estate investing involves buying, owning, and selling real estate property assets to make money. These real estate property assets can be houses, shops, buildings, vacant/commercial lands, and the list goes on.
Simply, real estate investing refers to purchases of real estate property assets, not for a primary residence - but for renting and reselling that one to earn money.
REITs vs. Direct Investing
Direct real estate investment may be a superior option if you desire cash flow, tax incentives to balance that income, and a high potential for gain. In addition, it's a good choice if you want to be more in charge of your money and like to be in the order of things.
REITs are an excellent choice for investors who do not want to manage or operate real estate. REITs are also an excellent method for newbie real estate investors to get their feet wet in this business type. Because Real Estate Investment Trust REIT companies are well familiar with the real estate business.
Both real estate and stocks are useful ways to grow your assets, so you can choose which avenue suits you best. As a beginner, I recommend investing in stocks because that approach offers more investment opportunities.
Beginner's Property Investing Advice
As a beginner, you might wonder how to get started in real estate investments. We recommend that you work with an experienced, reputable agent. A real estate agent is an expert in this industry and knows all about it. They will protect your investment and help you make more money as well.
The best way to limit your risk when it comes to real estate is by forming a limited liability company or a limited partnership. These can also help protect your assets if something happens. To ascertain which strategy is most appropriate for you, you should see an attorney.
Hiring a lawyer to look after your assets is a great way to ensure that anything invested goes smoothly. If an accident happens or someone pursues legal action, you'll know that you have the right people on your side protecting your money and any other valuables.
- Risk and volatility are lower than in the stock market
- It may be a vital cash flow source
- Numerous tax deductions
- There isn't as much room for aggressive returns
- Requires large sums of money
- Inadequate liquidity
- It might be challenging to deal with renters and building concerns
Real estate investing can be a good investment for beginners as it can provide handsome returns and help you create wealth. Still, illiquidity, or the difficulty of changing an asset into cash and then back into a purchase, is a disadvantage of real estate investment.
Unlike a stock or bond purchase, a real estate transaction might take months, while a stock or bond purchase can be completed in seconds.
Finding a suitable counterparty might take many weeks, even with the help of a broker. On the other hand, REITs and real estate mutual funds provide superior liquidity and market pricing.
Keep your expectations reasonable and research before making any decisions, just as you would with any other investment, and it can surely pay off.
Published: December 3rd, 2022