Ways to Become a Real Estate Investor

January 27, 2022

Real estate can be a valuable part of your investment portfolio. Throughout history, real estate has been one of the most dependable long-term investments. Property always appreciates with enough time. Whether you are thinking about dabbling in real estate investment to supplement your income or you are considering a full-time career as a real estate investor, there are several approaches you can take.

House Flipping

This is actually the way Tim got into real estate. The idea is pretty self-explanatory, especially if you watch any of the many shows about house flipping on HGTV and other channels. You find a house that needs work in a desirable area. You buy it for a low price, invest money to fix it up, and then sell it for a higher price. If all goes well, you will make a significant return on your investment. Your goal is to get in and out as quickly as possible by minimizing expenses and maximizing the final selling price.

Home Building or Value-Add Construction

You can also build new homes or do what’s known as a “value-add” build. This is different from house flipping because it takes more time to do permitting with respective cities. The basic principal is fairly simple. You can buy a small or run-down house on a large lot. If the original house is not salvageable, you can tear it down and build a new one. Or, you can take the existing structure and expand to make full use of the property available. You can also just buy a plot of raw land (ideally one already zoned for residential construction). Then, you design and build your own house from scratch.

Home building or value-add building will require more money out of pocket and generally more construction time, as well. However, the profits can be excellent if you do things right. It’s all about leveraging your finances, having a solid building plan and then adding as much resale value to the property as possible.

Income Property

The other most common approach to real estate investment is “buy and hold” investment where you use the house as an income property. You buy a single-family home or a multi-family property and then rent it out. You may spend some time and money renovating the property before it is rented out, or you can pay more upfront to get units that are already in good shape. The goal is to earn rent payments from month to month that will generate profit year in and year out for as long as you hold onto the unit(s). Also consider that the property will appreciate over time, so there is long-term earning potential if and when you decide to sell.

For those interested in building their real estate investment portfolio, we typically suggest you get as many units as you can. This will diversify your portfolio and generate maximum returns on your investments. Don’t bite off more than you can chew. If you are just getting started, begin with one property and then build your way up to more units.

It’s important to develop a strong business plan and budget before taking on any real estate investments. You have to figure into your return items such as renovation/repair expenses, maintenance, property taxes, potential vacancy periods, utilities and property insurance—just to name a few. It is also important to analyze whether or not it makes sense to leverage your money, and if so, how much?

There are other forms of real estate investment. You can join a property investment group, invest in a real estate investment trust (REIT) or wholesale properties. Of course, there are also raw land and commercial property investment opportunities, as well. Research the market and determine what works best for you, your budget and your income goals.

Check out this video from Tim Durkovic about ways you can invest in real estate: