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Here’s a stat you likely didn’t know. Nearly 60% of the world’s cumulative assets consist of real estate. Of all the global wealth, that’s more than half that’s accounted for in real estate. There’s a reason the planet’s wealthiest people flock to real estate investing. It’s smart. It’s practical. A little cash and the right for sale opportunity, and you're all set. And anyone with a solid strategy can achieve financial and NOI success in real estate.
You’ve been on the sidelines long enough and are ready to take a series of steps forward toward real estate investing. Now all you need are the full-proof tips and strategies to ensure you make sound decisions as you get started. Here’s a 101-level crash course for those of you who are beginners at this real estate investing journey. This is the investing guide every first-time investor needs to see before making any decisions.
Understand the Four Ways to Earn a Return
Before you buy property, it’s important to first understand the four core methods of earning a return in real estate. You’re not doing this because it’s fun. You’ll want to always manage your portfolio through a lens of profitability. Of course, there will be setbacks and situations that present risks. But if you’re not operating with these four pillars of money-making in mind, then you’re likely just managing a property as a hobby.
Real Estate Investment Appreciation
When you’re buying, selling, and managing property, you’ll always want to be mindful of appreciation opportunities for growth. Upgrades to rental property, scooping up lots adjacent to your property, and identifying the types of property that have greater demand can all contribute to a positive appreciation.
Cash Flow
There are opportunities to increase and develop robust cash flow from your real estate investments. Owning rental property or commercial property, for example, can establish monthly revenue channels. Don’t be afraid to explore portfolio additions like storage units, multi-family units, or retail spaces, too.
Brokerage Income
For specialists who are brokers, there are potential revenue channels for real estate investing in the form of commissions earned helping clients buy or sell a property. Real estate management companies that assist property owners with their rental process can also achieve revenue by collecting fees or percentages.
Ancillary Income
For some real estate investors, ancillary income can be huge. These sources of revenue might include vending machines throughout your properties or laundry facilities in a multi-unit rental property. Recognize opportunities for these “mini businesses” to exist and offset any financial risks in the process. The cash flow alone could be enough to make a significant difference to your bottom line.
Understanding the Risks of Real Estate Investing
Now that you know how to make money with real estate, your next order of business should be to understand the associated risks with investing. Knowing what pitfalls lay ahead will help you identify risks and take the necessary steps to mitigate them.
Real estate investing can be cash-heavy
Property is not liquid like cashing in on the stock market
Challenges are hard to predict in the market
Managing properties can be complicated and labor-intensive
Not all properties will be top money-makers
Repairs and maintenance can get costly
Dealing with residents can be complicated and costly with damage, late rent, etc.
What Are the Various Types of Real Estate to Buy?
Depending on where you look, sound real estate investment properties can be found almost anywhere. Know what to look for, including opportunities outside of your backyard, since property management can be handled entirely remotely with the right partners. Primarily, you’ll find success in identifying and buying properties to align your portfolio with a healthy mix of property types.
You can consider:
Residential Properties
Vacation Rental Properties
Commercial Properties
Retail Properties
Industrial Properties
Each will provide its own set of regulations for ownership and management, along with various financing options. Before you buy anything, however, remember to consider how each will make money and counter by evaluating all the associated risks.
Avoid Common Mistakes in Real Estate Investing
There is no magic wand answer to fast money in real estate. It’s a long game for which you’ll want to align all the necessary tools and resources to guide your decisions. It’s also best to seek out common investing mistakes so you know what NOT to do. There aren’t get-rich-quick solutions, but there are tips for those who are just getting started to help make the most of those initial investments.
Here are some of those tips and a few mistakes to avoid:
Real Estate Investment Trusts or REITs are great for beginner investors
Find the right digital software tools to help you manage your portfolio
Rental properties can be easier first-property investments
House flipping continues to be popular if you have the resources and knowledge
Buying plots of land is a great long-term investment
Airbnb and vacation rentals are ideal revenue streams for beginner investors
Don’t overextend your financial resources and stick with a budget
Plan for the worst-case-scenario
Don’t try to handle all the property maintenance yourself, even if you’re able
Avoid real estate investing on your own, without the advice of professionals
Strategic Investment Partnerships You Should Consider
Know that there will be certain aspects of real estate investing that are going to be foreign to you. If you have a construction background, for example, property maintenance is a breeze, but understanding the legal aspects of a rental property might be new to you. Alternatively, you might have an accounting background, making you an expert in handling the books for your portfolio. But you lack knowledge in real estate or sales, putting you at a disadvantage. Recognize your strengths and weaknesses. Then you can go about building the strategic partnerships with professionals you need to build and maintain a profitable real estate portfolio.
You might want to talk with these professionals who have an express knowledge of real estate:
Accounting, tax, and bookkeeping partners
Legal and attorney representatives
Property management firms
Lending or banking partners
Real estate agents or brokerage partners
The Axel Property Management Advantage
You can take all the unnecessary and risky guesswork out of real estate investing when you work with Axel Property Management. You’ll leverage the many advantages of partnering with experts in the Lehigh Valley real estate market who also know a few things about savvy investing for NOI results.
Our teams will work with you to identify your goals and then help you develop the right strategy to achieve them. From buying your first property to planning for portfolio diversification and growth, get the real-time, real-world advice you need based on your budget and core objectives. We’ll help you avoid those common investment mistakes. And our team of professionals will ensure you understand every aspect of real estate investing so you can make the soundest decisions.
Consider these tips and suggestions as your 101-level crash course and introduction to real estate investing. It’s a smart and incredibly lucrative way to financial success. Just don’t go it alone and schedule a call with the Axel Property Management team. We can discuss all of your options and provide the guidance you need to reach financial freedom.
