How to invest in Real Estate?

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Thinking about purchasing an investment property? Real estate has produced many of the world's wealthiest people, so there are plenty of reasons to think that it is a sound investment. Experts agree, however, that as with any investment, it's better to be well-versed before diving in with hundreds of thousands of dollars. Here are the factors and challenges you should consider before buying your first rental property.

KEY TAKEAWAYS

• 1. Investing in rental property can be lucrative, but it can come with many challenges.
• 2. Borrowers usually need to secure at least a 20% down payment for a rental property mortgage.
• 3. Being a landlord requires a broad array of skills, from understanding basic tenant law to fixing a leaky faucet.
• 4. Experts recommend having a financial cushion in case you don't rent out the property, or if the rental income doesn't cover the mortgage.
• Many investors have a real estate position in their portfolio. But adding other real estate investments can help you diversify your portfolio and protect you from stock market volatility. 
  

What are my investment options?

Here are the most popular real estate investment methods:

• Rental properties
• REITs
• Real estate investment groups
• Flipping houses
• Real estate limited partnerships
• Real estate mutual funds

How to get started in real estate

If you choose to invest in real estate, follow these five steps to get started:

1. Save money: Real estate has some of the most expensive barriers to entry of any of the asset classes. Before you get started, you’ll want to pay off your high-interest debt and have significant savings.
2. Choose a strategy: Each of the strategies listed above can be successful. If you choose to buy REITs or funds, you can use a website such as Millionacres to help you get started. If you want to buy physical property, you’ll need to decide on a market.
3. Assemble a team: You may want to work with an agent when you get started. Great agents will send you off-book opportunities that haven’t been listed yet. Eventually, you could need someone to manage your properties and an accountant to handle the financials. If you become successful, you may eventually need investors, too.
4. Do deal analysis: Whether you’re investing in residential or commercial real estate, you should do plenty of research on any investment. For example, with rental properties, you’ll need to analyze what future rent payments could be, what expenses you may be liable for, and forecast what you could sell the property for.
5. Close the deal: The final step is pulling the trigger. Close on your property, or make the buy in your brokerage account.