“Real Estate investing” always has an impressive, high profile ring to it, and rightfully so. It is a hundred billion industry where even beginners can easily make thousands per month (if they do it correctly). One strategy in particular, can cost a beginner a mere $100 or less to start, and it doesn’t even require any specific financial education, just a bit of diligence.
Of course, it should go without saying that beginners should do a LOT of research when getting into anything, especially activities where you can lose money. It is called “investing” after all, you don’t get something for nothing, and the real estate market is not without its risks. Like most markets, real estate is cyclical, it will have its bullish, and bearish periods. Everybody knows that a lot of people lose money in a housing bubble, but if you’ve done your homework, you’ll realize that this is nothing that should discourage you from getting into the real estate market today.
It is assumed that before you start investing, you’ve already done sufficient market research on the area that you’ll be working. Having a significant number of contacts would be good, but as a beginner, you can build one as you go along. Once you’ve covered these, then it’s time to plan your next strategy.
Here are the top 4 ways a beginner can get into the real estate industry.
1. Contract flipping
Simply put, this just involves finding an underpriced property that a seller, better yet a “motivated” one wants to sell urgently, and a buyer for it. You draw up a contract and assign that to the buyer. Once the deal closes, you get paid your “assigning fee”.
2. House flipping
This involves finding and buying undervalued properties, or those which need minor repairs, and reselling them. Simple concept to grasp, but you’ll need to secure a decent amount for repairs, starting at around $5000. It also entails a bit of risk, since you’ll be losing money within the time you can’t find a buyer for the property, but profit margins are higher than wholesaling or contract flipping.
3. Buy & Hold
Possibly the oldest form of real estate investing, what you want to do is find a viable property to buy low, fix it up, then rent it out to get a monthly influx of cash. This will require a significant amount of capital, which you can either get from a private investor, or from a bank.
4. Buy, Renovate, Rent, Refinance, and Repeat
Some may argue that this isn’t for beginners, but if you’re keen enough to make buy and hold work, you will be able to do this too. BRRR&R is an ongoing process where you are essentially using a financing deal with lower interest rate to finance an older loan used to buy or repair the property that you’re going to rent out.