Buying and owning properties is a great investment strategy that can turn out to be quite profitable. There are different ways to get started: you can buy rental properties or become a “real estate flipper” who buys undervalued houses to renovate and sell at a profit months later.
Whichever option, investing in real estate can be more profitable (and with less risk) than the stock market. After all, receiving one or more monthly rents represents a great additional revenue stream. But entering this market is not for everyone. It requires a lot of capital to invest and dedication.
For those starting, real estate can be confusing and challenging at first. Take a look at these tips to understand how to deal with the real estate market.
- Talk to Agents/Brokers
Real estate is not a part-time job. You need to devote a lot of time to it. A considerable part of your day will be spent talking on the phone with potential buyers and sellers, and you will also have to deal with a lot of bureaucracy—contracts, legal issues, insurance, etc.
To make sure you’re prepared for this, talk to people who already work as real estate agents or brokers. Those already in the industry can provide advice and explain the pros and cons of the market. If you decide it’s the right area for you, the people you’ve sought advice from can also help you in the future when you need connections.
- Look Into Crowdfunding
Investing in real estate through crowdfunding can be an easier way to get into it with less risk and time commitment. Popularized on the internet, crowdfunding is a practical way to raise money. These consist of projects in which many people are willing to invest a small amount. By doing so, large sums of money can be raised more quickly.
Real estate crowdfunding has a similar proposal. The investor doesn’t need to buy the entire property alone, as one would in the traditional market. Instead, you become one of several investors in the project and are entitled to a share of the profits generated from that property—either the monthly rental income or part of the property’s sale value.
There are several sites offering real estate crowdfunding, such as Diversyfund. If you think it’s a more viable option to start with, read Diversyfund reviews to better understand how it works in practice.
- Research the Market
You need to know the real estate market in depth to be able to identify good investment possibilities. In addition, your prospects will always be eager for details and answers about the property, the area around it, other similar neighborhoods, etc.
To become a real estate expert, whether as an agent or investor, you need to research the market and understand its main opportunities and risks. Here are some things you should determine in your research before making a financial commitment:
- Understand market trends: the areas of the city that have become or are about to become popular, which sectors are in excess or lack of supply, etc.
- Focus on where you intend to work, researching the neighborhood, property value, and its performance (whether there’s already a demand for properties in that area or not).
- Keep up-to-date on new developments that may change supply and demand in the area.
- Understand how the value of a property is determined to know if it’s worth investing in real estate in a certain area or another.
- Work in the Industry
Even after researching the market and understanding it you still have doubts, it might be a good idea to work as an assistant or intern in the industry for a while before investing on your own. It will be a trial-by-fire that can help you learn more about the market. Offer to shadow someone who already works in the area, following them in their work routine.
You can also experiment by renting an unused part of your house, such as a bedroom or garage, through sites like Airbnb. Although on a smaller scale, this experience will introduce you to some of the pros and cons of real estate.
- Don’t Overdo It
Forget the idea that you can get rich overnight with real estate. The truth is, especially in the beginning, it can take months for you to negotiate a property or find a tenant to cover your daily expenses. Remember that a vacant property doesn’t yield anything and still entails costs of all kinds.
So don’t overdo it. You should pace yourself with investments, start slow, and then build. Enter the real estate market with savings that allow you to cover the costs for a few months without ending in debt. And be prepared for the ups and downs of the market.
Building a Promising Career
Investing in real estate can be exciting and rewarding, but it’s not for everyone. Like all investment decisions, you must understand the market to know if it’s for you. Assess how much time you have to devote to this and how much capital you can invest. If you’re just starting, consider taking it one step at a time, for instance, choosing to invest in real estate crowdfunding rather than buying your own property directly.
The real estate market offers several benefits, including the ability to have assets that value over time, flexible hours, and the chance to earn a considerable financial return. But to build a promising career in this market, you need to commit yourself professionally and financially. If you do, the chances of success are excellent.