Real Estate 101 - The ABCs of Where to Put Your Money Now!

Posted by Melissa Case on Wednesday, July 19, 2023 at 12:25:34 PM By Melissa Case / July 19, 2023 Comment

Real Estate 101 - The ABCs of Where to Put Your Money Now!

If you are looking into ways to increase your wealth, investing in real estate is a great option. Investing in real estate can offer potential investors the opportunity to generate income and build equity for their future. While there are many reasons why people invest in real estate, it’s important to understand the different types of investments available before jumping into this financial venture. In this blog post we will discuss the various forms of real estate investment opportunities and how they can allow you to earn passive income and create long-term wealth.

#1. REAL ESTATE INVESTMENT TRUSTS

With real estate prices skyrocketing, buying a property might seem out of reach for many. However, not all is lost. Real estate investment trusts (REITs) offer an opportunity to invest in commercial real estate without the hassle of actually owning a property. REITs own a variety of properties, including retail stores, hotels, and apartments, giving investors a diverse portfolio of income-generating assets. One of the biggest advantages of REITs is the potential for higher dividend payouts, making them particularly attractive to retirees looking for passive income streams. By investing in REITs, you get a little piece of the pie without having to go all-in, making it a great option to consider for those looking to diversify their investment portfolio.

#2. RENTALS

Have you ever thought about becoming a landlord? Maybe you've stumbled upon a rental property for sale, and you're wondering if it's worth the investment. Well, let me ask you this: what if the rental is in an in-demand location, like the Bay area, and already has tenants? That sounds like a pretty sweet deal, especially for a first-time landlord. Sure, the price may be a little higher than you anticipated, but think of the potential for long-term, steady income. Renting is becoming increasingly popular, and with the right property, you could be cashing in on this trend in no time.

#3. FLIPS

There's something thrilling about turning rough, run-down homes into stunning, desirable properties. It's no wonder flipping houses is a favorite activity of handy investors everywhere. It's a challenge, and if done correctly, a flip can result in a substantial profit. For those looking to invest in foreclosures, cash is king. Banks want to see a repayment of the existing mortgage, and a cash offer is incredibly appealing. With the right amount of dedication and hard work, flipping can be a fun and exciting adventure with plenty of rewards.

Why Invest in Real Estate?

Investing in real estate can be a smart move for diversifying your investment portfolio. Not only does this type of investment offer the potential for sizeable returns, but it also allows you to have a physical asset that you can touch and feel. In contrast to stocks and bonds, property values tend to appreciate over time, meaning that the longer you hold your investment, the more it is likely to be worth. Additionally, by purchasing properties in areas with high demand, you can generate rental income that provides a steady flow of cash. Overall, investing in real estate can provide more stability and long-term benefits compared to other types of investments.

#1. DIVERSIFICATION OF PORTFOLIO

Diversification of your portfolio is essential in the world of investing. It's like the old adage: don't put all your eggs in one basket. A diversified portfolio puts your assets into different categories, such as stocks, bonds, and real estate, to spread the risk. This way, if one category falls, the others may still perform well. Investing in stocks or bonds alongside other investors spreads the risk even more. Diversification can lead to a higher return on your investment than just relying on one source of income or capital appreciation. Researching diversified investment options is a must for anyone serious about investing.

#2. INFLATION HEDGING

One of the most popular ways to hedge against inflation is through real estate investment. This asset class often has little correlation with stocks and bonds, making it an enticing choice for those who want to diversify their portfolio. As inflation rises and home values increase, an investor's equity in the property also goes up if the mortgage payments are fixed. This is particularly beneficial when investing in rental properties, as raising rental rates regularly while keeping the mortgage payments the same can help with balancing the inflation rate. Investing in real estate also affords the opportunity to lock in low mortgage rates, providing a source of financial stability and security.

#3. LEVERAGE

Unlike stock market investments, real estate investments offer the use of debt to finance a larger purchase than what may be available in cash. Leverage allows investors to use mortgages to purchase a property, thereby providing the potential for greater returns. This means that with a modest initial investment, an investor can acquire a high-value asset and profit from it in the long term. While leverage in real estate investing may seem intimidating for some, it is also an essential tool that can provide investors with great benefits.

For many homebuyers, the prospect of owning a property can seem daunting due to the hefty down payment required for most conventional mortgages. However, did you know that depending on the location, you might find a mortgage that requires as little as 3.5% down payment? That's right - you could control the whole property and its equity by only paying a fraction of the total value. While the size of your mortgage may impact your ownership of the property, the fact remains that you are in control the second the papers are signed.

Budding entrepreneurs seeking to expand their portfolios in the real estate industry may consider taking out a second mortgage on their homes to purchase additional properties. With this strategic move, they can invest in two or three rental properties such as commercial office buildings, to earn profits in the long term. By having tenants assume the financial burden of the mortgage, the investor can ultimately sit back and watch their properties generate steady income. Even more enticing is the possibility of finding an opportunity to sell for a considerable profit. The purchaser controls the assets, and all returns on their investment will be welcomed.

FAQs on Learning About Real Estate Investing

#1. What age should you start investing?

When it comes to investing, age is just a number. While legally you may have to wait until you turn 18 to sign property paperwork, that doesn't mean you should wait to start investing altogether. In fact, the earlier you start, the better off you'll be in the long run. Of course, there's no one-size-fits-all answer as to when you should start investing. Some people will feel more comfortable taking on real estate deals in their 20s, while others may wait until their 30s or even later. Ultimately, the key is to do your research, understand your options, and make informed decisions about when and how to invest your money for maximum return.

#2. What comes first in real estate investing?

If you're interested in getting started with real estate investing, the first step is simply taking the first step! There are plenty of resources available to help you get started, from social media influencers to coaching programs to informational blog posts. But ultimately, the most important thing is to just start somewhere and go from there. And if you're not quite ready to jump right in, there are other options to consider. For example, if you already own a home, you could try renting out a spare room to test the waters and see if you enjoy being a landlord. The key is to find what works best for you and take that first step towards building your real estate investment portfolio.

#3. What do certain states require in terms of continuous education?

Becoming a real estate agent is an exciting path that allows you to help people find their dream homes, make investments, and create a career out of your passion. However, to stay relevant and maintain your license in some states, continuing education is required. It's important to know what specifically your state requires to keep your license active and avoid any penalties. Whether it's a certain amount of hours or various courses, keeping up with your education helps you grow as an agent and keep your clients happy. So, if you're considering jumping into real estate, take some time to research your state's continuing education requirements and see how you can expand your knowledge.

#4. What is the best investment strategy for me?

It's important to consider your own personal finances and find an investment opportunity that works best for you. Whether it's investing in real estate or stocks, the key factors to consider are time and money. Take a good look at your financial situation and determine what you can realistically invest. From there, explore different options and find a strategy that meets your goals and fits your budget. Remember, the best investment strategy for you is the one that aligns with your personal needs and helps you achieve your desired financial future.

#5. Who should I connect with for networking?

The truth is, there is no limit to the number of people you should network with. The more individuals you connect with, the more opportunities will present themselves. Think of networking like being a sponge. You want to absorb as much knowledge as possible from all the different experts in your industry. Each person has their unique experiences and perspectives, making them invaluable resources. So, go ahead, reach out to as many potential mentors as possible, and watch the doors of opportunity start opening up for you!

#6. Where Will You Start?

The key is to find the investment that suits your unique needs and goals. Maybe you’re looking for an income-generating property to rent out or a fixer-upper to flip for a profit. Whatever your preference may be, it’s important to take the time to assess your situation and determine exactly how much time and money you’re willing and able to invest. After all, time is a precious commodity, and you want to make sure you’re devoting it to a smart and profitable real estate investment. So, where will you start? The choice is ultimately yours, but with careful planning and research, you’ll be on your way to building a successful real estate portfolio.

Real estate investment is not for the impatient. Its acquisition process is considerably slower than stocks or bonds, but the rewards can be worth the wait. While mutual funds and real estate investment trusts may offer higher liquidity pricing, they also come with significantly higher volatility and lower diversification benefits as they correlate with the stock market. In contrast, real estate offers a more steady income stream, making it ideal for individuals looking for a reliable source of income that they can maintain alongside their 9 to 5 job. Take time to learn the ropes, set your expectations, and once you're ready, investing in real estate can prove to be a highly beneficial move.

MELISSA CASE

703-899-6583

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melissacase.jacobsandco.com