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How to invest in real estate to make money and build wealth

Real estate can be a very lucrative investment, but it requires huge time commitment, patience, and most importantly, cash.

Although there are opportunities for beginners to enter real estate, the big returns are found in the big investments – for example, buying and managing a multi-family house or setting up a single-family home and selling it for a profit.

Here are a few ways to get into real estate investment:

How to invest in real estate to make money

1. First you need to get your finances in order

Before you come to any kind of real estate investment, get the rest of your financial house in order ̵

1; establish an emergency fund, pay consumer debt and automate your pension savings.

Real estate is a particularly expensive investment, so you must have cash available for a prepayment (or to buy the property directly) and a reserve to dive into if and when to settle, which must be completely separate from your daily emergency fund.

2nd Try investing in a REIT

If you want to bet on real estate, investing in a real estate investment service (REIT) will give exposure to the market without the time and cost of buying your own property.

Equity REITs, the most common type of REIT, allow investors to raise their money to finance the purchase, development and property management. A REIT focuses on a particular type of real estate, such as apartment complexes, hospitals, hotels or shopping centers. Ninety percent of the annual earnings – usually in the form of rental housing – are returned to investors as dividends.

If you want to keep your investment liquid, stick to publicly negotiated REITs. You can buy shares through a brokerage firm, IRA or 401 (k).

If you are willing to share paths with your money in order to earn higher returns, consider investing in the private property market through an online broker like Fundrise.

Fundrise helps you invest in property projects around the United States without having to deal with them. Investors can choose a portfolio to invest in based on their goals – either additional income, balanced investment or long-term growth – and earn dividends quarterly. Fundrise says the platform is best for investors who have a time horizon of at least five years.

3rd Knowledge of the local housing market

If you are planning to buy your own investment property, start by getting to know the local market – or better still, living in your own neighborhood.

Talk to real estate agents and locals; find out who lives in the area, who moves to the area and why; and analyzing price history. In short: Do your research.

4th Building a Local Team

Successful real estate investment is all about what you know as you know, Boston-based real estate agent and real estate investor Dana Bull said.

"I think if you really want to get into real estate, you need to focus on building relationships with people – that's what is real estate, it's a relationship-based business," Bull told earlier Business Insider.

Build a team of real estate agents, contractors, lawyers, and accountants, who can all help your business run smoothly, she said.

5th Keep It Easy

A simple strategy can go a long way in real estate investment. If your goal is to generate passive income, don't be fooled into thinking that you need to go big to make it happen. Early Retirement and Real Estate Investor Chad Carson from CoachCarson.com says it's best to start small and keep your costs low.

"In my view, the game of rental properties is ultimately getting free and debt-free, so you have a very low-risk, high-income investment that allows you to go to Ecuador and do whatever you want Do With Your Life – Leave Your Job Or Get A Little Independence To Do Other Things, "he said on an episode of Mad Fientist podcast.

6th Buy a single-family house and rent it out

Buying a single-family house and renting it will only generate income if the overhead costs are low. If your tenant's rental payment does not cover mortgages, insurance, taxes and maintenance, you lose money effectively. Ideally, your monthly mortgage payment will be relatively fixed while rental rates will increase, increasing the amount of money you pocket over time.

You can even buy rental housing online using a website such as Roofstock, which allows resellers of vacant homes to present their properties, facilitate the purchase process and assign a property manager to the new buyer.

7th Try & # 39; house hacking & # 39;

Carson started real estate investing through a strategy he calls "house-hacking".

He bought a four-unit building with a mortgage, and lived in a unit himself and rented the other three. This cut down its own cost of living and generated enough income to cover his mortgage payment, taxes and insurance each month, he said. He made residual money for savings, which he used to handle inevitable maintenance costs and roll into his next investment.

8 thereof. Buy a multi-family building and sell the units later

Bull calls this a "condo conversion" where you buy a multi-family building, rent the units, and then later convert the units into condos and sell them individually.

"So the idea is that you buy the building a bit for a discount, and finally you can sell for the top dollar," Bull told Business Insider.

"I call it the triple monster," she said. "You have short-term cash flow, long-term appreciation to build wealth over 15 or 20 years, and then … ways to force appreciation if you need to get out."

If you get into a binder and can't afford to stick, Bull suggests making "affordable but thoughtful upgrades to the property to unlock" before selling – think fresh paint, new countertops and refacing cabinets.

ninth Buy a fixer upper and flip it

While the fixer upper strategy has been glorified by popular culture, it is still one of the most time-consuming and expensive ways to invest in real estate – but it also has the potential to produce the greatest gains .

Buying a home, renovating it and reselling it can be a hit or a miss. You should always be prepared for unexpected problems, budget increases, time-inducing errors, a longer refurbishment timeline, and problems selling on the market.

It is especially important to build a team of experts you can trust and make sure you have the cash reserve for troubleshooting.

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