The economy is humming along, at least for the time being, but interest rates are low, and many middle-class Americans are looking for better ways to invest their money. On top of that, the 2008 housing market crash traumatized many of us, and not everyone feels comfortable investing in their home. That’s why many people are exploring investing in other forms of real estate.
According to a survey by Better Homes and Gardens Real Estate, 89% of U.S. investors are interested in putting their money into real estate.
So if you’re exploring the world of real estate investment, where do you even begin? How does the average investor learn how to invest in real estate?
Read, Read, Read, and Read
Already this year some really fantastic articles have been written for beginner investors looking into the exciting world of real estate. The Forbes Real Estate Council just released the helpful guide, “18 Ways New Real Estate Investors Can Succeed In 2018.” Over at The Balance, writer Joshua Kennon — who literally wrote the book about investing for beginners — just published another helpful introduction, “Real Estate Investing Guide for New Investors.”
The Forbes article talks about the importance of networking and setting reasonable expectations. By knowing more and more contacts in the real estate industry, the better chance you’ll have of being successful. Likewise, investing in real estate isn’t easy, which is why you should try to have reasonable expectations. However, just because it isn’t easy doesn’t mean it’s impossible.
According to Kennon’s new guide, the goal of investing in real estate is to “put money to work today and allow it to increase so that you have more money in the future.” This is important to understand because the return you’ll make on investments will need to be enough to cover expenses of the initial investment.
While it may not be the most exciting advice, one of the best ways to gain more knowledge about investing in real estate is to read about it. Getting tips from experts and others in the field will allow you to develop a basic knowledge of the do’s and don’ts, which you can then put to work when you begin investing.
Look to the suburbs
Today, 14% of Americans have changed jobs just to shorten a commute, but that doesn’t mean the suburbs are dying off. In fact, the American suburb is thriving in 2018.
“High prices and lower returns for commercial property in major urban centers like San Francisco are prompting major investors increasingly turn their dollars toward suburban markets,” writes Jeff Quackenbush with the North Bay Business Journal.
Investors are seeing a shift in tenant demand toward more lively, walkable cities that have more transportation modes to offer residents. People nowadays really want to live somewhere they can work, live, and play all in the same area, and often that means moving to the suburbs.
This is especially true among millennials. While 48% of buyers are interested in homes that have no previous residents, according to Zillow, millennials are interested in so much more than that aspect of home buying. For younger generations, it’s more about the area the home is located in, rather than the home itself. They want to have a short commute to work and then be able to go out after work, all within the same area. It’s important to understand these changing trends when investing in property.
Explore Triple Net Leases
When it comes to leasing property, triple net leases are great options for beginning investors. Under this lease, the lessee pays the “three nets”, which include building insurance, real estate taxes, and maintenance fees. These types of properties are generally low risk investments that offer a predictable cash income. These leases offer owners more of a hands-off approach and allow them to have to do little management with the property. Plus, triple net leases tend to attract long-term tenants, and every landlord knows it can be difficult to find reliable tenants. While it’s important for owners and lessees to completely understand the terms of any lease, this type of lease may be a good way to ease into property ownership and management.
Overall, the world of real estate investment is always changing. While investors can get a big payout from their properties if they invest wisely, there are also a lot of risks that need to be taken in order to be successful. Because of this, it’s important to fully understand what you’re getting into. By doing thorough research, talking to others in the field, and coming up with a well-thought plan, you could be on your way to being a pro in no time.