Invest Now in Real Estate

Because real estate is often considered a low-risk investment, many are quick to jump in with expectations of turning a quick profit. Popular television shows on buying investment property and flipping houses feed into the idea that investing in real estate is fun and easy.

However, not all real estate investments are low risk. Some require specialized real estate skills and many require patience and time to realize a positive return on investment.

If you’re considering becoming a real estate investor and entrepreneur, this guide to the real estate industry offers an overview of real estate investing for beginners and the five skills needed for successful real estate investment careers.

Types of Real Estate

Not all real estate is the same — properties are often zoned for specific uses. Before you become an investor, it is important  to understand the different types of real estate and typical zoning regulations to guide you on what to include in your investment portfolio.

Residential

Residential real estate is property that has been specifically zoned for living in. This includes single- and multi-family homes and apartment buildings.

Commercial Property

Commercial property is real estate that has been zoned for businesses, typically industrial or retail. This could include shopping malls, office buildings, warehouses, and manufacturing sites.

Land

Land refers to the ground surface and extends both below the earth’s surface and up into higher airspace. It encompasses any structures, water, plants, or minerals located on the land. Land can also be zoned as residential, commercial, industrial, agricultural, or other specific local zoning designations. Developers may petition local governments to change the zoning laws for land that they own (or want to buy).

Potential Career Paths for Aspiring Real Estate Professionals

There are so many career paths in real estate, but before you jump in, it’s important to understand that there is a difference between investing in and working in real estate.

When you work in real estate, you don’t put your own money into properties. Instead, you can sell a property for different owners, real estate development companies, or investment groups; manage properties; or help finance properties.

Real Estate Agent

A good real estate agent is an integral part of successful property sales. As licensed professionals, real estate agents are hired by individuals or business groups who want to buy or sell properties to help guide complicated real estate transactions. They typically work on commission.

If you want to become a real estate agent, your responsibilities include:

• Understanding the local market. Based on your knowledge of the local market, you will help set asking prices to meet your client’s specific needs.
• Marketing properties. You will advise your client on how to make their properties attractive (such as staging homes or suggesting cosmetic upgrades). You should also have the tools, experience, and contacts to market properties to a wider audience.  
• Handling the paperwork. Buying or selling property can be complicated – and real estate transactions require a lot of paperwork. As a real estate agent, you will know what documentation is required, and in many cases, can draw up the contract.
• Negotiating price. Buying and selling real estate often involves negotiations, which you will facilitate.

Property Manager

Property managers are hired by property owners to manage the day-to-day property operations. As a property manager, your responsibilities could include:

• Finding prospective renters
• Collecting deposits and rent
• Handling maintenance requests
• Checking on properties if the owners live out of the area

Real Estate Investor

Real estate investors put money into properties in the hopes of selling that investment for a profit at a future date. If you choose to be a real estate investor, you could own one or more properties, or pool your money with other investors into a fund that includes several properties. You earn money when properties in the fund are sold. You may also earn income from the rental of the property while holding the asset.

As an investor, you could have a full-time job in a different industry or invest in other types of businesses.

 

Real estate investors can earn money in the real estate market even during times of rising interest rates. How you choose to invest will depend on your risk tolerance and available investment funds. There are several ways to earn money by investing in real estate.

Property Appreciation

Real estate generally appreciates in value over time — your profit comes from selling a property at a higher value than what you bought it for. Savvy investors buy properties in up-and-coming neighborhoods so their property appreciates at a higher rate over the long term. Property appreciation is generally a long-term investment that offers a one-time pay-out when the property is sold.

Rental Income

For predictable, regular cash flow and passive income, you could buy properties to rent out — either through long-term leases or as short-term vacation rentals. Choosing this investment strategy means you become a landlord, which makes you responsible for collecting the rent or making emergency repairs. You could also choose to work with property management companies to manage your rental investment property.

Property Flipping

Flipping houses has grown in popularity due to television shows that make it look easy and lucrative. To make money flipping houses, you could buy properties that are run down or outdated at a low price for the local market, then renovate the houses quickly and sell at a higher price. Flipping houses can have big profits, but it helps to know how to make repairs and do renovations on your own. Having  good relationships with contractors who can help you estimate the costs of the repairs and make the repairs at a reasonable price is also helpful.

Real Estate Investment Trusts

If you don’t want to own property but still want to generate income from the lucrative real estate market, you can invest in real estate investment trusts (REITs), which act like mutual funds for commercial real estate. Typically, REITs are owned by a company that owns or finances commercial property. You and other individuals invest in the RIET, which is publicly traded, making it very similar to investing in the stock market.

If the REIT makes money, you earn dividends, which you can cash out or reinvest. The upside of investing in a REIT is that they don’t require a large up-front investment and you can earn regular dividends. However, you won’t benefit from property appreciation and you will be subject to taxes when you cash out your dividends.