Historically real estate investments have been American’s best long-run investment. However, this has been primarily for their own residence. Homeownership is considered a low-risk investment that has a high potential for return and growth. However, starting out with other types of property investments seems challenging and complicated. Luckily, when you begin your research, you’ll see that it isn’t as daunting as it seems at first. You can use this article as a guide for real estate investments for first-timers. If you understand all the pros and cons of each property investment strategy, you’ll be better prepared to succeed and build your wealth over time.
Buy and Hold Real Estate
This is the top long-term real estate investment strategy. However, it’s also a long-term commitment. It entails buying an investment property and holding on to it for many years, at least until significant price appreciation has taken place. This strategy requires no prior knowledge and experience, just the willingness to learn and basic real estate market research. It has two approaches:
- You keep the property, maintain it, and passively wait for its value to go up. By doing so, you build wealth in the long term.
- You can become a landlord and rent the property to make extra rental income. That’s possible if the property is in good shape and does not require any repairs. You’ll get the best return on rental property investment and make money in the short run, too, while you wait for the appreciation.
As a first-time real estate investor, you can make a lot of money with this strategy. That’s regardless of temporary ups and downs in the real estate market. Real estate prices are constantly bouncing back. That’s not only because of the ever-increasing demand but also because the land on which properties are built is a limited resource.
Sizeable natural appreciation helps investors build wealth without putting in extra effort and grow their real estate investment portfolios with ease. If you decide to start with this strategy, be sure to invest in a location expected to undergo major infrastructure and economic developments – that will push the appreciation up. Also, you should opt to buy a property below market value. Therefore, invest in a foreclosed property – those are usually listed at discounted rates.
Owning Traditional Rental Property
The second of the best real estate investments for first-timers is buying and owning traditional rental property. You can rent it on a monthly basis, but lease agreements usually have a one-year duration.
To be successful with this strategy, you need to buy a profitable property in a top location and then find good tenants. The difference between the rental income and the costs of running a property will be your positive cash flow. For this to be successful, you should hire a professional property manager. They will save you lots of time and effort, optimize your property’s management, and increase profitability. Meanwhile, you can enjoy your passive income from real estate or take real estate investment to the next level and work on growing your investment portfolio and wealth even more.
This strategy will also give you some flexibility. If the economic situation changes and the rental demand drops, you can switch your rental strategy. For example, convert your property into an Airbnb/vacation rental.
House Hacking
House hacking is one of the great real estate investments for first-timers. It means cautious home buying of a multi-family property and living in one of the housing units while renting out the rest. Your tenants can pay for your rent and your investment property. It’s perfectly possible to manage the duplex or triplex on your own because you live on site. So, there is no need to spend money on a professional property manager. However, this strategy is good only if you’re capable of sharing a property with your tenants in the long-run.
Having bad tenants can cause you many troubles. If you’re sure you can handle it, look for a small multi-family home that can be split into 2, 3, or more housing units. To avoid potential problems and succeed in this, you’ll need to screen the prospective tenants particularly well and ensure the rental income covers the entire monthly mortgage payment and other ongoing expenses.
Fix and flip real estate
Flipping houses has been very popular recently. One of the best real estate investments for first-timers looking for quick cash is undoubtedly a fix and flip real estate strategy. It implies buying a property in poor condition, fixing it up, and then selling it. You can make a significant amount of money with this strategy very quickly – it can all be done in a couple of months, provided that you don’t buy the wrong house. Fix and flip also gives you access to additional sources of financing – various loans become accessible and affordable, and you can repay them quickly. Fix and flip allows first-timers to get a taste of most aspects of the real estate business without a long-term commitment. With this strategy, you won’t have to deal with tenants and their demands.
If you’re ambitious, have a dynamic personality, and resourceful nature, you should definitely consider this when starting your investment business. However, have in mind that this is not something passive – you will have to work hard to make money.
Hiring a good real estate agent is crucial, especially for this strategy
If you want this to be successful in house flipping, you’ll need a strong real estate network in order to buy underpriced properties, repair them, and sell them quickly enough to make a profit. Experienced investors who prefer this strategy over any other always look for:
- Off-market properties
- Foreclosed homes
- Short sales
- Bank-owned properties
- Any other good opportunity in a top location
First-time investors need to keep in mind that markets like NYC require professional advice, so hiring an experienced real estate agent to help you during this process is crucial. They will help you find the undervalued property. Once you fix it and update it, they will help you sell for the best possible price.
Final thoughts
Now you know and understand more about the best real estate investments for first-timers. As a real estate investor, you’ll always have a wide variety of options. However, whichever strategy you choose, be sure to consult with professionals, analyze the housing market and properties well, budget carefully and manage your investments diligently.
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