How to Invest in Real Estate: A Beginner's Guide

Estimated read time: 4 minutes

We all dream of being able to retire one day and live comfortable lives, enjoying the fruits of years of labor. Regardless of whether you dream of living happily ever after in your forever home, heading out on an indefinite trip around the world, or plan to sell everything and hit the road in an RV, planning for your future requires making some important financial decisions as early as possible.

One of these important financial decisions is taking steps to start investing. It's never too early to make your first investment, and there's no shortage of opportunities. One of the most common is real estate investing, which is a great place for beginners to start.

Real estate investing can look different for everyone, and investors can approach it with a variety of different strategies. This can depend on various factors, including how much you are looking to invest, the real estate market, and your goals for the investment, to name a few.

If you are in the market for real estate investments, consider pursuing one of the following strategies.

Buy a Fixer Upper

Fixer uppers aren't just for TV – they can actually make for great financial investments. If you have the skills and time to invest in showing a run down home some love, the vision to bring it back to life, and a solid understanding of the renovation costs and how much the home will be worth when it's done, buying a fixer upper can be a fantastic investment.

The key here is to buy low with the intention of making improvements that will increase the value and allow you to turn around and sell the house for a profit. Investing in a fixer upper is a lot of work, but it can be rewarding both long term and as you invest time and money into the property.

Use Fundrise

Fundrise is an online real estate investment platform. Invest your money in private market real estate through Fundrise and your investment will be diversified across multiple properties.

Choose from four different plans including a starter portfolio for new investors who are just getting started, a supplemental income plan, balanced investing, or a long-term growth approach.

Buy a Home

Make the switch from renting to home ownership as a financial investment in your future. Buy a reasonably priced home, ideally one that is priced at or slightly below market value, take good care of it over time, and ideally your investment will pay off long term when you've paid the home off and it's all yours.

Rent-to-Own

If you aren't in a position to buy a home outright, consider a rent-to-own arrangement. In this situation, you'll sign a contract agreeing to rent your home for a specific amount of time. Part of your monthly rent will go towards a down payment for a mortgage, and the idea is that once you've reached the end of the arranged amount of time, you'll buy the home.

Be careful when entering into these arrangements, and make sure you fully understand the contract before agreeing to it. This can be a great way to start taking steps towards a real estate investment, even if you have some other financial obligations to take care of before you can be all in with an investment.

Invest in Peer-to-Peer Loans

Join other investors on a peer-to-peer (P2P) investment platform, and combine your money with theirs to make real estate investments. Similar to an REIT but with more freedom to choose the specific investments your money funds, a P2P platform applies the crowdfunding approach to real estate investing and allows you to spread your investment across multiple different projects.

Purchase Vacation Properties

Do you have a favorite vacation destination you head to multiple times a year? Perhaps you actually live in a popular travel destination? Invest in a vacation property, either for yourself or others to enjoy.

Buying a vacation property for your family and friends to enjoy can be a great financial investment as well as a great way to provide a backdrop for memory making. Investing in a property to be rented to others through a platform such as AirBnb can be a great way to make a consistent additional income, especially if it's located in a popular area for tourists.

You can even combine the two by purchasing a vacation property for yourself and renting it out to others when you're not using it. This way your vacation property doesn't sit empty between your visits, and you can make some additional income along with your investment.

Buy Commercial

Residential properties aren't the only smart real estate investments. While this is likely to be a bigger, riskier investment and may require some other investors to get on board with you, purchasing a retail or office property can be a highly rewarding investment opportunity. One main benefit is that you'll also earn monthly income by renting the commercial space out to businesses.

Consider REITs

A real estate investment trust (REIT) is a company that owns or finances real estate that generates income and allows investors to buy shares in hopes of putting part of that income in their own wallet.

Purchasing shares in an REIT can be advantageous as most of the taxable income the REIT earns on the property is paid as dividends to shareholders. You have the opportunity to earn money by acting as a shareholder instead of bearing the responsibility of being the investor.

Reaping the Rewards

Investing in real estate can have tangible benefits, as well as long term financial rewards as well. It can be risky, time consuming, and take a lot of patience and some knowledge, but it can be kind of fun, as well.

If you're looking for a way to make your first big investment, real estate is a great place to start. Choose the approach that works best for you right now, and go for it!


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