Investing in real estate is a wonderful way to create wealth over the long-term. Hundreds of experts have differing opinions on how to get started and what you should be thinking about when launching your new investment business. Start investing in real estate to create cash flow, freedom, and a new way to build a passive income business.
So many strategies exist to start small and give yourself the opportunity to understand the details before going bigger. One of the best ways to get started is to live in your own property and rent out a few rooms. This “house hacking” strategy has been used by thousands to reduce monthly housing costs and create financial freedom.
Once you have a solid understanding of how you want to approach investing in real estate – start moving forward. Reading blogs, listening to podcasts, and adjusting spreadsheets are all helpful, but the best way to learn is by doing. Buy your first duplex, triplex, or fourplex and you’ll force yourself to figure out the next steps.
I’ve found that one of the best ways to learn about investing in real estate is to read about what others have done to launch their investing journey. Here’s a list of some very helpful articles that outline how to get starting with real estate investing.
How To Get Started Real Estate Investing With Just $500 – The College Investor
Real Estate Investing 101 – 9 Steps to Get Started – Coach Carson
How To Start Investing In Real Estate – Forbes
How to Invest in Real Estate – Dave Ramsey
How to Invest in Real Estate: 5 Ways to Get Started – Nerd Wallet
A Beginners Guide: How to Get Started Real Estate Investing – Money Matters
How to Invest in Real Estate: 3 Basic Steps & What to Expect – Investor Junkie
Real Estate Investing Tips for Beginners – The Balance
How I Make Over $250,000 a Year in Real Estate Investing – Good Financial Cents
How to get started with real estate investing – Get Rich Slowly
How to Start Investing in Real Estate | A 5 Step Plan – Dough Roller
Do you have additional articles that should be added to the list? Please comment below and let us know.
Making the decision to invest in real estate changed my life forever. Ever since I was in high school, I was always intrigued by the opportunity that real estate could create for me.
Back in 2009, the real estate market had hit rock bottom. Multi-unit properties were hitting the market for 25% of what they were sold for in 2006. Either everyone was in trouble or this was a once in a lifetime buying opportunity. I choose to jump in a take the position that this couldn’t last forever – so I went for it.
The first financial models that I built were very simple and didn’t provide a long-term view of my business. Since then, I’ve been iterating on my model numerous times per year. I love where it is now – the model shows me cash flow and property value projected out ten years. The long-term view is super important for me because it’s easy to lose sight of the ultimate prize…more cash flow.
My real estate investment toolkit will give you everything you need to launch your first real estate business.
What is Investment Real Estate?
Investment real estate is real estate that generates income or is otherwise intended for investment purposes rather than as a primary residence. It is common for investors to own multiple pieces of real estate, one of which serves as a primary residence while the others are used to generate rental income and profits through price appreciation. The tax implications for investment real estate are often different than those for residential real estate.
Strategies to Reach 1 Million Dollar Net Worth
It seems that so many financial bloggers make it seem easy to actually achieve a financially free lifestyle. Reaching goals and moving forward isn’t easy, it takes dedication and the ability to move forward when everyone else is telling you you’re crazy.
Step out and figure out the path to get into real estate investing or join a small business and give your self the opportunity to succeed. It’s not really about penny pinching and living on zero cash. Life your life in freedom, find your identity, and keep moving forward.
Take a look at some strategies for reaching your goal of saving 1 million dollars. Notice that these strategies don’t reference small savings here and there – these are big ideas that can propel you into financial freedom. Think big and don’t look back.
- Set big goals and read them often
- Focus on passive income through real estate or online businesses
- Enable your creativity to thrive and build something unique
- Save 20% of your income
- Purchase investment property and have a long-term hold strategy
- Invest in low-cost index funds
- Keep track of your progress using tools like Personal Capital
- Limit your exposure to consumer debt. Purchase cars when you need them, not when you want them.
- Expand your network by learning from others that already have achieved similar goals
- Put a plan together on how you will change your current financial situation. It only takes one step to start moving in a new direction.
Make the decision to change – its only a decision – we’re all rooting for you.
Getting started with real estate investing is something that anyone can do. Learning some of the lingo can be really helpful before you start to talk with other investors or real estate agents. Once you get comfortable talking about cash on cash return or appreciation, then you can dig deeper and research more complex topics.
Understanding the core principles of real estate investing will enhance your wisdom and decision making process when it comes time to find the right property.
Take a look at the list outlined below – some great terms to get you started on your real estate journey.
Appreciation is an increase in the value of an asset over time. The increase can occur for a number of reasons including increased demand or weakening supply, or as a result of changes in inflation or interest rates. This is the opposite of depreciation, which is a decrease over time.
At its core, depreciation is simple: You figure out how much the property is worth for tax purposes (the property’s basis), how long the IRS says you must depreciate it for (its recovery period), and then you deduct a certain percentage of its basis each year during its recovery period. Rental buildings are depreciated over 27.5 years. The recovery periods for personal property—office furniture and computers, for example—are much shorter, usually five or seven years. This means you’ll get your full depreciation deduction much more quickly. It is to a landlord’s advantage to be able to classify as much rental property as possible as personal property, rather than real property.
You need to keep accurate records for each asset you depreciate showing:
- a description of the asset
- when and how you purchased the property
- the date it was placed in service
- its original cost
- the percentage of time you use it for business
- the amount of depreciation you took for the asset in prior years, if any
- the asset’s depreciable basis
- the depreciation method used
- the length of the depreciation period, and
- the amount of depreciation you deducted for the year.
The capitalization rate is the rate of return on a real estate investment property based on the income that the property is expected to generate. The capitalization rate is used to estimate the investor’s potential return on his or her investment.
Cash on Cash Return
Cash-on-cash return is a rate of return often used in real estate transactions that calculates the cash income earned on the cash invested in a property. For example, when an investor purchases a rental property, she might put down only 10% for a cash down payment. Cash-on-cash return measures the annual return the investor made on the property in relation to the down payment only.
Four Ways to Value an Investment Property
- Sales Comparison Approach
- Capital Asset Pricing Model
- Income Approach
- Cost Approach