How to invest in real estate in 2022 - Three ways to get started

Posted by Alex Narodny on Thursday, January 20th, 2022 at 9:08am

If investing is one of your New Year’s resolutions, buying real estate is a popular way to diversify your portfolio and generate passive income. As a beginner, you may feel overwhelmed by all the terminology, the market, capital, and even the risks versus rewards. If you have no idea where to start – you’re not alone. With a bit of work and dedication, you’ll be making money moves in no time. Let’s look at some common options to help you start investing in real estate.

Become a Landlord

The most hands-on, learn-as-you-go strategy to get you started is also among the most financially rewarding. Purchasing residential real estate and becoming a landlord provides attractive income and tax benefits while the property appreciates in value. Many rental properties are leased out for 12-month periods, but with the growing popularity of shorter-term rental companies, like Airbnb, your rental property could act as a revolving door for cash flow.

But let’s face it, being a landlord isn’t for everyone. Managing a rental will require your active involvement, including screening tenants, managing repairs and upkeep, and fielding complaints. Buying rental properties often requires a down payment of up to 25% as well, so take an honest look at your current financial situation to see if it’s achievable for you.

Invest in REITs 

If you’d rather avoid the headache of managing a rental property, don’t have much money saved, or worry about putting all your savings into one property, real estate investment trusts (REITs) are an easy way to get your feet wet as a new investor. These low-risk, high-liquidity investments offer diversification, reliability, and potentially high returns. REITs can own anything, including apartment buildings and single-family homes. 

Before you invest in REITs, make sure you do your homework. Does this REIT have a decent track record? Are other investors satisfied? Is there provable growth from earnings? To ensure you’re making smart investments, consider asking for referrals from past players in the game. 

Look Into a Fix and Flip

If you’re a fan of fixer-upper shows, you might want to invest in a fix and flip. Though this is the riskiest of the three options, if done correctly (and with a little bit of luck), this short-term investment strategy is extremely profitable. The key is to keep renovation costs low — but that’s often easier said than done. The price of construction materials and labor have been climbing since last year, and cheap houses are rare.

For this investment strategy, you’ll want to have a healthy budget and make good decisions.

Those decisions start when you’re looking for a house to flip. Be conscious of several factors, including location and physical condition. A home that needs cosmetic changes, but is structurally sound, will be much more budget-friendly than a home that needs a new roof. The goal of flipping homes is to buy low and sell high – so be strategic!

Real estate investing can feel intimidating at first. The good news is that no matter your experience level, there are options for you. If you’re looking to diversify your portfolio, generate monthly income, or even benefit from long-term capital appreciation, consider these three strategies to get you started this year.

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