Here’s how to get started in real estate investing as a beginner. Real estate investing is something we have all thought about at one point and is the OG tried and true way to create wealth over time. Whether you want high ROI on your cash, passive income or to diversify and accumulate assets over time and create wealth, real estate can get you there. But what real estate strategy is right for you?Â
For this you have to look at a few controls, like your location, access to capital, the cycle or the market you are investing in, so for example right now in real estate we are at a plateau and due for a crash, I’m not sure when that will happen, or even if it’s going to happen, but it’s something to think about and deciding which of the strategies, that well mention, and weighing which one resonates with your investing style the best.Â
The first way is, in my opinion, the best way to get started creating wealth, if you don’t currently have a home, say you’re in your 20’s or 30s and looking to build wealth and create passive income. And that’s…Â
Table of Contents (Click to expand)
How to get started in real estate investing?
There are a lot of different ways on how to get started in real estate investing, this article will help identify the 7 different ways based on complexity and the money needed to get started. In this article we’ll talk about strategies like house hacking, wholesaling, BRRRR, house flipping, developing, buying rental properties, and investing in land.Â
House hacking
For any of you who have not heard of this real estate investing strategy, it’s where you buy a property, like a duplex and live in one of the units, and rent out the rest to cover your mortgage payments or even cover it all together.Â
With house hacking, you are buying a property to live in, but also investing in real estate: it’s a hands-on learning experience for aspiring real estate investors. When you house hack, you gain experience and knowledge about property management, tenant screening, lease agreements, and maintenance. It’s learning by doing! This practical experience gives you a solid foundation for your future real estate investments.
House hacking will accelerate your ability to build wealth early on. Here’s why:Â
When you live in one unit of a multi-unit property, you’re considered an owner-occupant. That gives you access to more favorable financing options, like lower down payments and interest rates. On top of that, your tenants’ rent payments contribute towards your mortgage, allowing you to build equity and wealth through principal reduction and property appreciation. Over time, the value of your property can go up well.Â
Now what this does is it allows you to Scale and grow, by allowing you to expand your real estate portfolio by taking down more properties. The rental income from your initial house hack can be used as a down payment for future investments. This scalability allows you to increase your cash flow and use the appreciation and equity you’ve built and invest that in future deals.Â
Imagine this, you have 10 duplexes that are rented out, and you send all the excess cash flow to one of those 10 units, so that you can pay one of them off as fast as possible. Once its paid off, you send all that cash flow from that to the next property and repeat. It’s a snowball effect that can make you very wealthy over time and accelerate the paydown of all the mortgages.Â
The next way to get started investing in real estate is…
Wholesaling Real Estate
Probably one of my least favorite methods, but that’s only because of my personal experience. Many years ago, my old business partner and myself were wholesaling about 10 deals a month. We scaled ourselves out of business. We were marketing on radio, PPC, direct mail and more. We went like 6 months with no deals after Harvey hit Houston and just never started that back again. So it works but just wasn’t right for me.Â
Wholesaling is a popular starting point for investors that are low on capital. As a wholesaler, your role is to locate off-market real estate, speak to the seller, negotiate a purchase price well below market value and assign your interest to a real cash buyer for more and make a spread.
You secure a property under contract at a below-market price and then assign the contract to a buyer for a fee. This strategy requires negotiation skills and building a network of buyers. Wholesaling allows you to earn income quickly with minimal risk and upfront investment.
So if you’re looking to get started in real estate, but low on capital, then this may be an avenue for your to pursue further.Â
There is some money needed to get started. And I wanted to reiterate this because there is a lot of misconception around this. It is advertised and promoted by a lot of gurus, stating that it does not require money upfront. But to be a successful wholesaler you will need to spend money on marketing. Even if you were driving for dollars you will need to spend money on gas.Â
But with that being said, if you decide that this is where you want to start, make sure to have integrity and consider keeping one of them for out next way to get started in real estate and that’s…
House Flipping
House flipping is where you buy distressed properties, renovate them, and sell them for a higher price. Definitely riskier than the previous way we just mentioned, but it’s high reward if you get good at it.Â
You’ll need to get good at finding the properties and buying them at a good price, which is a skill wholesaling can teach you, that allows you to make money when you sell it, market analysis, careful budgeting, effective project management, and strategic marketing are the keys to making money here.Â
Some reason why this can be a great strategy is…
Profit potential: Flipping houses offers the opportunity to generate a lot of money within a relatively short period. There are flippers making 50k or multiple 6 figures on single flips. So a lot of upside.Â
Scalability: Flipping houses allows investors to have control over their projects and the ability to choose when and how many properties to flip. You can create systems and processes that allow you to really scale this up and do many projects a month. You can also adjust your strategy based on market conditions, available capital, and your personal preferences.
Creating wealth: Successful house flipping can lead to increasing your capital significantly where you can have the ability to reinvest profits into larger and more profitable projects. The profits generated from each flip can be reinvested to fund new projects, or by using the next way which is….
BRRRR
This strategy is where you follow the similar steps it took you to take down a flip, but instead of flipping it for a quick profit you can, refinance your money out of the deal and keep it as a rental.Â
BRRRR stands for Buy, rehab, rent, refinance and repeat.Â
So you will find a distressed property that needs some work, buy it, fix it, then rent it out, once stabilized you can refinance and pull most or even all of your money from the refinance and take your money and repeat the steps all over again.Â
So who is this for, well lets look at the benefits and you decide.Â
Recycling capital: You can use your money over and over again by because refinancing gives you a significant portion of your initial investment. This allows you to invest in more properties and grow your wealth.
Generating cash flow: By fixing up the properties and making them attractive to renters, you can earn a steady stream of rental income. This cash flow helps cover expenses and contributes to your long-term financial goals.
Increasing property value: Through renovations, you can add value to the properties. This boosts their market worth, allowing you to build equity and potentially make higher profits when refinancing or selling.
Building long-term wealth: By repeating the BRRRR process, you can build a portfolio of income-generating properties. The combination of the cash flow, equity appreciation, and acquiring more properties over time will make you wealthy.
The next strategy is one I’m thinking about starting and its…
Developing
I plan on souring infill lots and building a duplex on it. Ive never done this before but here’s why I think it’s a great strategy.Â
First, I have more control: When building houses, you have complete control over the design, layout, and quality of construction. This allows you to build properties that you feel like will appeal to your ideal end buyer, or renters, and align that with your goals.
Less surprises: Building houses means new materials, appliances, and infrastructure. This means more dialed in costs to build vs older properties that can have surprises when you decide to rehab, that weren’t calculated into the flip.Â
So from what I understand, builder can usually get really close to their projected number on building cost, because there are just less unknowns and surprises. But if you were flipping a house, then you could discover something in middle of the rehab, that could eat into all your profits, or even put you in the Red.
And there is less…
Competition: Flipping houses can be competitive, I remember trying a few years back and just couldn’t find a good deal with some meat on the bones. When building houses, you can bypass this competition by purchasing vacant land or infill lots. This can provide you with more options and potentially better deals, as you have the flexibility to choose where to build.Â
Im still looking into this, but make sure to subscribe to watch what happens next.Â
The next way to get started in real estate is…
Buying Rental Properties
Buying rental properties is a common way to generate consistent cash flow and long-term wealth. This is where you would probably need the most capital, because you wouldn’t be using hard money or private money for the most part.Â
You are straight up just purchasing property (residential, multifamily or commercial) and leasing them to tenants, this way you can create passive income with mortgage paydown. You would need to be Careful on property selection, tenant screening, management, and market.Â
You can reach out to a local realtor and let them know what you are looking for and they can help identify a property.Â
I prefer BRRRR over this so that you can create some equity and refinance majority of your money out, that way you don’t have a lot of capital sitting in that asset.
The next way to get started investing in real estate is..
Flipping Land
Flipping land is where you buy raw land, below market value and flip it for more. Â
It’s a strategy that involves buying land with the intention of selling it for a higher. Unlike other forms of real estate investing that we discussed, which involves buying properties with the goal of holding onto them for passive income or renovating them and flipping it for more, land flipping is all about buying lots for 35-50% of its market value and selling it for more, or seller financing it for passive income.
The idea behind land flipping is to find land in an area you want to buy in, and we teach all of this in flip academy, buy it at a low price, and then sell it for a higher price. There’s obviously a lot more detailed steps to this.
With land you don’t have renovations, but you could do some sort of value add, to increase it value by making improvements to the land, such as clearing it, installing utilities, or obtaining necessary permits, or subdividing a large parcel of land into smaller lots, which would increase your price per sqft or acre on that lot.
One of the biggest advantages of land flipping is that its the least saturated and competitive form of real estate compared to everything I’ve already mentioned.Â
You would need some capital to start for marketing directly to sellers of the lots and to purchase the lots. But you could also find a partner or lender that deals w land and team up on the deal.
You could even start with this and move into developing on the lots as you grow.Â
