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

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

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-dwelling building or attaching a family and selling it for a profit.

Here are some ways to get into real estate investments:

How to invest in real estate to make money

1. First, you need to get your finances in order

Before entering any kind of real estate investment, get the rest of your financial house in order ̵[ads1]1; create an emergency fund, pay consumer debt, and automate retirement savings.

Real estate is a particularly expensive investment, so you have to have cash on hand to get a down payment (or to buy the property directly) and a reserve to dive into if and when something needs fixing, which should be completely separate from your daily emergency fund.

2. 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 expense of buying your own property.

Equity REITs, the most common type of REIT, allow investors to pool their money to fund real estate buying, development and 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 salary – usually in the form of rental income – is returned to investors as dividends.

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

If you are willing to share ways with your money to get more returns, consider investing in the private real estate market through an online broker like Fundrise.

Fundrise helps you invest in real estate projects around the US without actually dealing 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 that the platform is best for investors who have a time horizon of at least five years.

3. Getting to Know the Local Housing Market

If you are planning to buy your own investment property, get to know the local market – or better yet, be 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.

4. Build a Local Team

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

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

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

5. Keep it simple

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 you need to go big to make it happen. Early retiree and real estate investor Chad Carson from CoachCarson.com says it's best to start small and keep costs low.

"In your head, the game of rental property is about to get it free and ready for debt so you have a very low risk, high income investment that allows you to go to Ecuador and do anything else you" come to do with your life – leave your job or have some independence to do other things, "he said on an episode of Mad Fientist podcast.

6. Buy single-family homes and rent it out

Buying a detached house and If you rent it, you will only generate income if your overheads are low, if your tenant's rental payment does not cover mortgages, insurance, taxes and maintenance, you will lose money efficiently, ideally your monthly mortgage payment will be relatively fixed while rents will increase and increase the amount of money you pocket over time.

You can even shop for rental homes online via a website such as Roofstock, which allows sellers of vacant homes that are primed for tenants to list their properties, simplified is the buying process and assigns a property manager to the new buyer.

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

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

He bought a fourth unit with a mortgage, and lived in a unit himself and rented out the other three. This cut down its own cost of living and generated enough income to cover his mortgage, taxes and insurance every month, he said. He made some remaining money for savings, which he used to preserve inevitable maintenance costs and roll into his next investment.

8. Buying a multi-family building and selling the units later

Bull calls this an "apartment conversion", where you buy a multi-family building, rent out the units, and later set the units in condos and sell them apart.

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

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

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

9. Buying a fixer upper and flip it

While the fixer upper strategy has been glorified by popular culture, it remains one of the most time-consuming and costly 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 issues, budget increases, time-inducing errors, a longer refurbishment timeline, and issues selling on the market.

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