{"id":5520,"date":"2020-05-06T12:00:20","date_gmt":"2020-05-06T19:00:20","guid":{"rendered":"https:\/\/blog.neighbor.com\/storage-blog\/?p=5520"},"modified":"2023-09-29T22:43:12","modified_gmt":"2023-09-30T05:43:12","slug":"guide-real-estate-investing-beginners","status":"publish","type":"post","link":"https:\/\/www.neighbor.com\/storage-blog\/guide-real-estate-investing-beginners\/","title":{"rendered":"Guide to Real Estate Investing for Beginners"},"content":{"rendered":"\n

Real estate has remained a sound investment that can yield large profits for beginners and veterans alike. Even if you have been considering real estate investing, you might not know where to start. This guide real estate investing for beginners provides you with broad overviews of some basic real estate investment concepts you need to understand, as well as in-depth information about how to invest in real estate as a beginner.<\/p>\n

What Is Real Estate Investing?<\/h2>\n
Real estate investing is an umbrella concept that includes a wide variety of financial activities tied to property, like investing in REITs or renting out a home<\/a>. Your ultimate goal when you invest in real estate is to put your money to work so that you make a profit in the future. Once you do your homework and learn how to invest in real estate, you can make some serious money.<\/p>\n
Yet, you can lose money too if you don’t make the right choices. Investing in real estate has several advantages and disadvantages. Being successful as a beginner means you need to have a clear understanding of what you are getting into. We cover some of the main advantages and disadvantages of real estate investments below:<\/p>\n
<\/iframe><\/div>\n<h3 id=\"advantages-of-real-estate-investing-for-beginners\">Advantages of Real Estate Investing for Beginners<\/h3>\n<h3 id=\"1-lower-risk\">1. Lower Risk<\/h3>\n<p>If you choose to invest money in the stock market, trade options, or sell commodities, you face high to obnoxious amounts of risk and volatility. Although the real estate market does move up and down, it moves much slower than the stock market. Also, in the long-term, the housing and real estate market tends to move up. This strong historical trend tends to make real estate investing a lower risk than many other options.<\/p>\n<h4 id=\"2-cash-flow\">2. Cash Flow<\/h4>\n<p>Many types of investments can make you money, but how many give you continuous income flowing into your bank account? For example, investors who lease houses or apartments to others receive rents each month. When you’ve invested in the right amount of income-generating properties, you can create a dependable revenue stream.<\/p>\n<h4 id=\"3-tax-deductions\">3. Tax Deductions<\/h4>\n<p>Depending on the type of real estate investments you make, you can have several tax deductions. This allows you to realize profits without such a tax burden. Some examples of deductions you can take include interest on loans and mortgage payments, repair costs, home office expenses, and insurance costs.<\/p>\n<h4 id=\"4-good-long-term-return\">4. Good Long-Term Return<\/h4>\n<p>Investing in real estate doesn’t move fast like the stock market might. Your profits come from holding the property and reaping its benefits for years or decades. Real estate investments notoriously have good returns in the long run because they typically appreciate in value.<\/p>\n<h3 id=\"disadvantages-of-real-estate-investing-for-beginners\">Disadvantages of Real Estate Investing for Beginners<\/h3>\n<h4 id=\"1-less-aggressive-returns\">1. Less Aggressive Returns<\/h4>\n<p>Although you can make piles of money investing in real estate, your profits do not typically come from a high rate of return like those associated with more aggressive and risky investment strategies. The S&P 500 gained more than 600 percent from 1991 to 2019 compared to a <a href=\"https:\/\/fred.stlouisfed.org\/series\/MSPUS\" target=\"_blank\" rel=\"noopener\">160 percent increase<\/a> in housing prices during the same period.<\/p>\n<h4 id=\"2-requires-cash\">2. Requires Cash<\/h4>\n<p>Real estate investing can require a lot of cash, making some investments a poor choice for those who are cash-strapped. You need cash for maintenance, making building improvements, and in some cases, paying for a management company, as well as several other things.<\/p>\n<h4 id=\"3-poor-liquidity\">3. Poor Liquidity<\/h4>\n<p>The vast majority of real estate investments are not liquid. If you want to get cash out and have to sell your property or sell your interest in a property, you can typically expect to wait weeks or months.<\/p>\n<h4 id=\"4-tenants-and-maintenance\">4. Tenants and Maintenance<\/h4>\n<p>Any investor will tell you collecting rent and fielding maintenance calls from tenants is the least favorite part of their job. Not all real estate investments require such a hands-on approach, but those that do often come with many challenges such as late rent, power outages, and plumbing issues.<\/p>\n<html><body><div id=\"in_post\">\n <a href=\"https:\/\/www.neighbor.com\/host\" onclick=\"rudderanalytics.track('press editorial cta button', {location: 'first in post', version: '2.0'}, () => { console.log('track call'); });\">\r\n <div class=\"first-in-post-cta\">\r\n <header>\r\n <h2 id=\"can-we-pay-you-to-store-vehicles\">Can we pay you to store vehicles?<\/h2>\r\n <\/header>\r\n <section>\r\n <div class=\"service-option\">\r\n <div class=\"service-option-icon\"><svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"60\" height=\"60\" viewbox=\"0 0 60 60\" fill=\"none\">\r\n <path d=\"M26.7552 20.0573C26.2911 20.9853 26.2499 22.3578 26.2499 24.375H33.7499C33.7499 22.3577 33.7088 20.9853 33.2448 20.0573C33.0557 19.6792 32.8 19.3973 32.3888 19.1841C31.9442 18.9535 31.2108 18.75 30 18.75C28.7892 18.75 28.0558 18.9535 27.6112 19.1841C27.2 19.3973 26.9442 19.6792 26.7552 20.0573Z\" fill=\"#005EB8\"><\/path>\r\n <path fill-rule=\"evenodd\" clip-rule=\"evenodd\" d=\"M28.0777 4.32887C29.3195 3.87732 30.6805 3.87732 31.9223 4.32887L48.7973 10.4652C51.0173 11.2725 52.5 13.3777 52.5 15.7462V33.1425C52.5 33.7407 52.4058 34.3605 52.1888 34.9629C47.861 46.9738 35.9939 53.5676 32.1164 55.464C30.7986 56.1086 29.2843 56.1505 27.9278 55.5549C23.9729 53.8185 12.0728 47.6941 7.77513 34.8948C7.58399 34.3255 7.5 33.7394 7.5 33.1762V15.7481C7.5 13.3807 8.98165 11.2729 11.2027 10.4652L28.0777 4.32887ZM22.4998 24.1662L22.4999 24.375C20.4289 24.375 18.75 26.054 18.75 28.125V35.625C18.75 37.6961 20.4289 39.375 22.5 39.375H37.5C39.5711 39.375 41.25 37.6961 41.25 35.625V28.125C41.25 26.0539 39.5711 24.375 37.5 24.375L37.5 24.166C37.5016 22.4546 37.5037 20.19 36.5989 18.3802C36.0848 17.352 35.2859 16.4621 34.115 15.855C32.9776 15.2652 31.6017 15 30 15C28.3983 15 27.0224 15.2652 25.885 15.855C24.7141 16.4621 23.9152 17.352 23.4011 18.3802C22.4961 20.1901 22.4982 22.4547 22.4998 24.1662Z\" fill=\"#005EB8\"><\/path>\r\n <\/svg><\/div>\r\n <h3 id=\"list-your-unused-space\">List your unused space<\/h3>\r\n <p>People are earning $1,000s per year from their garages and outdoor space.<\/p>\r\n <\/div>\r\n <div class=\"service-option\">\r\n <div class=\"service-option-icon\">\r\n <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"60\" height=\"60\" viewbox=\"0 0 60 60\" fill=\"none\">\r\n <path fill-rule=\"evenodd\" clip-rule=\"evenodd\" d=\"M13.125 9.375C11.0539 9.375 9.375 11.0539 9.375 13.125V46.875C9.375 48.9461 11.0539 50.625 13.125 50.625H46.875C48.9461 50.625 50.625 48.9461 50.625 46.875V13.125C50.625 11.0539 48.9461 9.375 46.875 9.375H13.125ZM28.125 16.875C28.125 15.8395 28.9645 15 30 15C31.0355 15 31.875 15.8395 31.875 16.875V20.625H35.625C36.6605 20.625 37.5 21.4645 37.5 22.5C37.5 23.5355 36.6605 24.375 35.625 24.375H26.25C25.2145 24.375 24.375 25.2145 24.375 26.25C24.375 27.2855 25.2145 28.125 26.25 28.125H33.75C36.8566 28.125 39.375 30.6434 39.375 33.75C39.375 36.8566 36.8566 39.375 33.75 39.375H31.875V43.125C31.875 44.1605 31.0355 45 30 45C28.9645 45 28.125 44.1605 28.125 43.125V39.375H22.5C21.4645 39.375 20.625 38.5355 20.625 37.5C20.625 36.4645 21.4645 35.625 22.5 35.625H33.75C34.7855 35.625 35.625 34.7855 35.625 33.75C35.625 32.7145 34.7855 31.875 33.75 31.875H26.25C23.1434 31.875 20.625 29.3566 20.625 26.25C20.625 23.1434 23.1434 20.625 26.25 20.625H28.125V16.875Z\" fill=\"#005EB8\"><\/path>\r\n <\/svg>\r\n <\/div>\r\n <h3 id=\"approve-your-renters\">Approve your renters<\/h3>\r\n <p>You're in control. Approve who rents and the hours of access.<\/p>\r\n <\/div>\r\n <div class=\"service-option\">\r\n <div class=\"service-option-icon\">\r\n <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"60\" height=\"60\" viewbox=\"0 0 60 60\" fill=\"none\">\r\n <path fill-rule=\"evenodd\" clip-rule=\"evenodd\" d=\"M31.2776 51.9974L31.7666 51.5417C32.0789 51.2503 32.527 50.8317 33.0706 50.3224C34.1576 49.3041 35.6276 47.9224 37.158 46.4698C40.1682 43.6127 43.5576 40.3461 44.596 39.1282C46.7163 36.6414 48.1719 33.6468 48.8127 30.4251C49.5529 26.704 49.173 22.847 47.7211 19.3418C46.2692 15.8366 43.8105 12.8407 40.6559 10.7329C37.5015 8.62514 33.7942 7.5 30.0001 7.5C26.2061 7.5 22.4973 8.62504 19.3428 10.7329C16.1882 12.8407 13.7295 15.8366 12.2776 19.3418C10.8257 22.847 10.4458 26.704 11.186 30.4251C11.8268 33.6468 13.2824 36.6414 15.4027 39.1282C16.4411 40.3462 19.831 43.6128 22.8415 46.4698C24.3721 47.9224 25.8422 49.3042 26.9294 50.3225C27.4731 50.8318 27.9212 51.2504 28.2336 51.5418L28.723 51.9979C29.4428 52.6672 30.5579 52.6668 31.2776 51.9974ZM28.723 51.9979C28.723 51.9979 28.7232 51.998 30.0001 50.625L28.723 51.9979ZM30.0001 50.625L31.2776 51.9974C31.2776 51.9974 31.2771 51.9979 30.0001 50.625ZM30 32.8125C33.6243 32.8125 36.5625 29.8744 36.5625 26.25C36.5625 22.6256 33.6243 19.6875 30 19.6875C26.3756 19.6875 23.4375 22.6256 23.4375 26.25C23.4375 29.8744 26.3756 32.8125 30 32.8125Z\" fill=\"#005EB8\"><\/path>\r\n <\/svg>\r\n <\/div>\r\n <h3 id=\"get-paid-monthly\">Get paid monthly<\/h3>\r\n <p>Sit back and collect automatic payments each month.<\/p>\r\n <\/div>\r\n <\/section>\r\n <footer>\r\n <button>Learn more about hosting <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"24\" height=\"24\" viewbox=\"0 0 24 24\" fill=\"none\">\r\n <path fill-rule=\"evenodd\" clip-rule=\"evenodd\" d=\"M18.8304 5.17619L4.55227 11.6663H11.1779C11.8199 11.6663 12.3404 12.1867 12.3404 12.8288V19.4543L18.8304 5.17619ZM19.029 3.43822C20.0069 2.99374 21.0129 3.9997 20.5684 4.97757L13.0612 21.4935C12.5438 22.6316 10.8404 22.2627 10.8404 21.0124V13.1663H2.99417C1.74398 13.1663 1.37497 11.4628 2.51312 10.9455L19.029 3.43822Z\" fill=\"#EFF5F8\"><\/path>\r\n <\/svg><\/button>\r\n <\/footer>\r\n <\/div>\r\n<\/a>\n <\/div><\/body><\/html><h2 id=\"types-of-real-estate-investing-for-beginners\">Types of Real Estate Investing for Beginners<\/h2>\n<p><img decoding=\"async\" class=\"alignnone size-full wp-image-5524 pk-lazyload\" src=\"data:image\/png;base64,iVBORw0KGgoAAAANSUhEUgAAAAEAAAABAQMAAAAl21bKAAAAA1BMVEUAAP+KeNJXAAAAAXRSTlMAQObYZgAAAAlwSFlzAAAOxAAADsQBlSsOGwAAAApJREFUCNdjYAAAAAIAAeIhvDMAAAAASUVORK5CYII=\" alt=\"man and inspector looking at a property before purchase\" width=\"917\" height=\"612\" data-pk-sizes=\"auto\" data-ls-sizes=\"(max-width: 917px) 100vw, 917px\" data-pk-src=\"https:\/\/www.neighbor.com\/storage-blog\/wp-content\/uploads\/2020\/04\/Guide-to-Real-Estate-Investing-for-Beginners-Neighbor-House-Flip.jpg\" data-pk-srcset=\"https:\/\/www.neighbor.com\/storage-blog\/wp-content\/uploads\/2020\/04\/Guide-to-Real-Estate-Investing-for-Beginners-Neighbor-House-Flip.jpg 917w, https:\/\/www.neighbor.com\/storage-blog\/wp-content\/uploads\/2020\/04\/Guide-to-Real-Estate-Investing-for-Beginners-Neighbor-House-Flip-300x200.jpg 300w, https:\/\/www.neighbor.com\/storage-blog\/wp-content\/uploads\/2020\/04\/Guide-to-Real-Estate-Investing-for-Beginners-Neighbor-House-Flip-768x513.jpg 768w, https:\/\/www.neighbor.com\/storage-blog\/wp-content\/uploads\/2020\/04\/Guide-to-Real-Estate-Investing-for-Beginners-Neighbor-House-Flip-380x254.jpg 380w, https:\/\/www.neighbor.com\/storage-blog\/wp-content\/uploads\/2020\/04\/Guide-to-Real-Estate-Investing-for-Beginners-Neighbor-House-Flip-550x367.jpg 550w, https:\/\/www.neighbor.com\/storage-blog\/wp-content\/uploads\/2020\/04\/Guide-to-Real-Estate-Investing-for-Beginners-Neighbor-House-Flip-800x534.jpg 800w\" ><\/p>\n<p>Investing in real estate is more than simply buying a property and renting out space. Several different types of real estate investing for beginners offer opportunities for interested parties, each with their own set of advantages and disadvantages. The most common types of real estate investments include:<\/p>\n<h3 id=\"airbnb-ing-a-room-in-your-home\">“Airbnb”-ing a Room in Your Home<\/h3>\n<p>The increasing popularity of sites like Airbnb and VRBO makes it an appealing choice for real estate for beginners. It gives you an opportunity to dip your feet into using a property to make money on a small scale. You can set your availability, price, and requirements for those who you host. Yes, these sites do focus on leisure travelers who normally stay for a short time, but you can also offer long-term rental if you prefer. Renting out a room in your home gives you the chance to play with pricing during different times of the week and the year to really learn your short-term rental market and find the sweet spot where your room is rented more often than not.<\/p>\n<h3 id=\"rental-properties\">Rental Properties<\/h3>\n<p>One of the most popular choices in real estate investing for beginners and experts alike is to purchase rental properties. You can choose to rent out a condo, townhouse, or individual home, or purchase a building with multiple units. You will find there are many ways to approach rental properties. If you’re looking for ideas for real estate investing for beginners, many participate in house hacking, a term that real estate investing resource Bigger Pockets coined. House hacking is the notion of investors living in their investment property. You can do this with a single-family home, but most often, house hacking refers to multi-family properties that have up to four units. <a href=\"https:\/\/www.biggerpockets.com\/blog\/house-hackingcase-study\" target=\"_blank\" rel=\"noopener\">Brandon Turner at Bigger Pockets<\/a> shares several reasons why house hacking is a good choice for first-time real estate investors, such as:<\/p>\n<ul>\n<li>Low down payments<\/li>\n<li>An opportunity to learn the business<\/li>\n<li>The ability to monitor your investment<\/li>\n<li>Lower expenses<\/li>\n<\/ul>\n<h3 id=\"house-flipping\">House Flipping<\/h3>\n<p>Whether you have seen Property Brothers, Fixer Upper, Beach Flip, or one of another dozen or shows about flipping houses, you have likely been intrigued by the process and the profits these programs reveal to viewers. As you look into real estate investing for beginners, you should know that flipping a house isn’t as easy as they make it look on television. It’s also not likely you can do it as quickly as they do on TV.<\/p>\n<p>But you can make some money if you make careful and accurate decisions while doing a house flip. The risk of house flipping lies in its uncertainty. You make calculations about renovations and upgrades based on estimates and an established time frame. If all goes well, you will come in at or under your budget. This, however, is not always the case.<\/p>\n<p>The demolition process during a house flips can reveal problems with electrical, plumbing, and other systems once you start opening up walls. You simply will not find out about some costly issues during the inspection, which injects more risk into house flipping. You can reduce some of your expenses by living in the home as you fix it up. Alternatively, consider finding an investment partner to share the risk. If you are looking for your first house to flip, you may want to begin slowly and look for homes that only need cosmetic updates. Try looking for some of the most popular types of houses in your market.<\/p>\n<h3 id=\"online-real-estate-investing-for-beginners\">Online Real Estate Investing for Beginners<\/h3>\n<p>That’s right — you can invest in real estate online! For new real estate investors, investing in real estate online can be less risky. But it also offers several other potential benefits over other types of real estate investments. If you want to make money with real estate but have no interest in being a landlord or engaging in activities like fielding tenant calls, fixing things, and collecting rent, online real estate investing will interest you. Similarly, if you are worried about the risk of flipping a property or have no desire to oversee this kind of project, you can invest online and let others worry about the minutia. There are two main kinds of online real estate investments:<\/p>\n<h4 id=\"1-real-estate-investment-trusts-reits\">1. Real Estate Investment Trusts (REITs)<\/h4>\n<p>The best way to think about a REIT is to think of it as a mutual fund. A REIT is an entity that owns a wide variety of real estate, including commercial office buildings, apartments, hotels, shopping malls, and <a href=\"https:\/\/www.neighbor.com\/commercial\/retail-reit?utm_source=blog&utm_campaign=contentlinks\">other retail spaces<\/a>. You buy shares in a REIT and earn money in the form of dividends.<\/p>\n<p>Historically, REIT dividends are fruitful, making them especially attractive. If you do not need the money or you don’t want the income stream, you can reinvest your dividends into the trust.<\/p>\n<p>The biggest difference between a REIT and a mutual fund is that not all REITs are publicly traded, making some much riskier than others. You cannot sell your interest in a private REIT as easily because it is hard to value. As a new real estate investor, it’s often in your best interest to choose publicly traded REITs, which online brokerage firms sell.<\/p>\n<h4 id=\"2-real-estate-crowdfunding-platforms\">2. Real Estate Crowdfunding Platforms<\/h4>\n<p>If you are familiar with crowdfunding platforms like Kickstarter and GoFundMe, this gives you an idea of how real estate crowdfunding platforms work. Real estate developers, or those with a specific rehab project in mind, create a profile and business plan and look to investors to fund their projects. Depending on the situation, you can make debt or equity arrangements with developers.<\/p>\n<p>Debt financing is a loan in which the developer pays you back, plus interest. <a href=\"https:\/\/www.investopedia.com\/ask\/answers\/042215\/what-are-benefits-company-using-equity-financing-vs-debt-financing.asp\" target=\"_blank\" rel=\"noopener\">Equity financing<\/a> includes receiving a percentage of the profits upon completion of the project. Crowdfunding real estate projects can be extremely risky. These investments are speculative, and getting your money out is not always easy. An important part of real estate investing for beginners is due diligence. New real estate investors need to thoroughly research projects and avoid putting all of their capital into one deal.<\/p>\n<html><body><div id=\"2_in_post\">\n <a href=\"https:\/\/www.neighbor.com\/host\" onclick=\"rudderanalytics.track('press editorial cta button', {location: 'second in post', version: '2.0'}, () => { console.log('track call'); });\">\r\n <div class=\"second-in-post-cta\">\r\n <section>\r\n <div class=\"service-option\">\r\n <h2 id=\"earn-1000s-per-year-with-your-unused-space\">Earn $1,000s per year with your unused space<\/h2>\r\n <button>Become a Neighbor host<\/button>\r\n <\/div>\r\n <\/section>\r\n <\/div>\r\n<\/a>\n <\/div><\/body><\/html><h2 id=\"making-money-on-your-real-estate-investments\">Making Money on Your Real Estate Investments<\/h2>\n<p>With an understanding of the risks and benefits of investing in real estate and the types of real estate investments available to you, now you need to know exactly how you make money on your real estate investments. Profits from real estate investing typically come from one or more of the following four ways:<\/p>\n<h3 id=\"1-real-estate-appreciation\">1. Real Estate Appreciation<\/h3>\n<p>Any property you own or have an interest in might increase in value. Sometimes appreciation simply occurs over time as a result of inflation. Other times, new structures or homes shoot up around your property and increase its value — or businesses and residents move out and decrease its value.<\/p>\n<p>This also includes fluctuations in rent. If an area builds up and has more shops and restaurants and an optimal location for tenants to use public transportation, you can expect to receive higher rents. Property upgrades can also increase the value of the real estate, which is how you use appreciation to make money when flipping a house. You can make money when your real estate investments appreciate, but it’s not dependable income.<\/p>\n<h3 id=\"2-cash-flow-income\">2. Cash Flow Income<\/h3>\n<p>As a real estate investor, you can amass wealth by creating multiple streams of income with your properties. For most, cash flow income includes collecting rents from multiple properties. This might mean purchasing apartment buildings, storage units, office buildings, houses, and other commercial properties. As mentioned above, REITs can also provide regular income in some situations. Passive income associated with a real estate investment is especially favorable because you don’t have to actively participate to reap the benefits. Read more about <a href=\"https:\/\/www.neighbor.com\/storage-blog\/passive-income-streams\/\">passive income streams<\/a>.<\/p>\n<h3 id=\"3-real-estate-related-income\">3. Real Estate Related Income<\/h3>\n<p>You do not have to own a property to receive real estate related income. This money comes from industry or industry-adjacent jobs. Some examples include real estate brokers and property managers. In fact, some people choose to start their own property management company and collect fees in exchange for managing houses or apartment buildings and their maintenance for clients.<\/p>\n<h3 id=\"4-ancillary-real-estate-investment-income\">4. Ancillary Real Estate Investment Income<\/h3>\n<p>Another way that real estate investors earn income from their properties is through ancillary things like laundry rooms and vending machines. These types of income opportunities function as small businesses within a larger real estate investment and allow you to make money from your tenants. Ancillary real estate investments can create semi-dependable income streams that allow you to pay for upgrades and invest the money into your properties in other ways.<\/p>\n<h2 id=\"how-to-prepare-to-start-investing-in-real-estate\">How to Prepare to Start Investing in Real Estate<\/h2>\n<p>Once you understand the basics of real estate investing for beginners, including the types of investments you can make and the types of money you can bring in, you will be ready to jump in. But you need to take some important steps before you make any purchases. In no particular order:<\/p>\n<h3 id=\"pay-down-your-debt\">Pay Down Your Debt<\/h3>\n<p>You do not want to have financial obligations when you invest in real estate, especially credit card debt. Pay off your vehicles, student loans, and any other large or burdensome debts to really help you amass wealth as you invest.<\/p>\n<h3 id=\"save-for-a-down-payment\">Save for a Down Payment<\/h3>\n<p>If you want to own a property, <a href=\"https:\/\/www.neighbor.com\/storage-blog\/save-money-fast\/\">save the 20 percent down<\/a> to help you avoid having to pay mortgage insurance (PMI). If you prefer to invest in real estate online, then you need to save for your minimum deposit into a trading account, which can be as little as $500.<\/p>\n<h3 id=\"wait-for-the-best-opportunities\">Wait for the Best Opportunities<\/h3>\n<p>Don’t get so excited about the first property you see that you make a poor investment. Remember, another opportunity is always around the corner. If you are unsure, it’s best to wait.<\/p>\n<blockquote>\n<h5 id=\"pro-tip-always-be-learning\">Pro Tip: Always be learning.<\/h5>\n<p>Learn everything you can about real estate. This means reading books about real estate investing for beginners, listening to podcasts, and maybe even finding a mentor.<\/p><\/blockquote>\n<h2 id=\"funding-your-first-real-estate-investment\">Funding Your First Real Estate Investment<\/h2>\n<p><img decoding=\"async\" class=\"alignnone size-full wp-image-5523 pk-lazyload\" src=\"data:image\/png;base64,iVBORw0KGgoAAAANSUhEUgAAAAEAAAABAQMAAAAl21bKAAAAA1BMVEUAAP+KeNJXAAAAAXRSTlMAQObYZgAAAAlwSFlzAAAOxAAADsQBlSsOGwAAAApJREFUCNdjYAAAAAIAAeIhvDMAAAAASUVORK5CYII=\" alt=\"a lawyer and an investor looking at legal real estate documents\" width=\"918\" height=\"611\" data-pk-sizes=\"auto\" data-ls-sizes=\"(max-width: 918px) 100vw, 918px\" data-pk-src=\"https:\/\/www.neighbor.com\/storage-blog\/wp-content\/uploads\/2020\/04\/Guide-to-Real-Estate-Investing-for-Beginners-Neighbor-Lease-Agreements.jpg\" data-pk-srcset=\"https:\/\/www.neighbor.com\/storage-blog\/wp-content\/uploads\/2020\/04\/Guide-to-Real-Estate-Investing-for-Beginners-Neighbor-Lease-Agreements.jpg 918w, https:\/\/www.neighbor.com\/storage-blog\/wp-content\/uploads\/2020\/04\/Guide-to-Real-Estate-Investing-for-Beginners-Neighbor-Lease-Agreements-300x200.jpg 300w, https:\/\/www.neighbor.com\/storage-blog\/wp-content\/uploads\/2020\/04\/Guide-to-Real-Estate-Investing-for-Beginners-Neighbor-Lease-Agreements-768x511.jpg 768w, https:\/\/www.neighbor.com\/storage-blog\/wp-content\/uploads\/2020\/04\/Guide-to-Real-Estate-Investing-for-Beginners-Neighbor-Lease-Agreements-380x253.jpg 380w, https:\/\/www.neighbor.com\/storage-blog\/wp-content\/uploads\/2020\/04\/Guide-to-Real-Estate-Investing-for-Beginners-Neighbor-Lease-Agreements-550x366.jpg 550w, https:\/\/www.neighbor.com\/storage-blog\/wp-content\/uploads\/2020\/04\/Guide-to-Real-Estate-Investing-for-Beginners-Neighbor-Lease-Agreements-800x532.jpg 800w\" ><\/p>\n<p>The amount of money you need in real estate investing for beginners in real estate varies greatly depending on what type of investment you choose to make. You can start with as little as $500 if you are investing online. So, if you don’t have a large savings account or struggle with credit, this is a great way to get started.<\/p>\n<p>If you want to flip houses or purchase rental properties, you can fund these properties or their down payments from your personal savings. However, you should consider <a href=\"https:\/\/www.neighbor.com\/storage-blog\/side-hustle-no-hassle\/\">keeping cash on hand<\/a> for repairs, upgrades, and other expenses. So consider one of these funding options:<\/p>\n<h3 id=\"fha-va-loans\">FHA\/VA Loans<\/h3>\n<p>If you want to flip a house and you are willing to make it your primary residence, you should consider a loan from the Federal Housing Administration (FHA). The FHA insures the loan and offers low closing costs and down payments as low as 3.5 percent. The Veterans Administration (VA) offers similar loans with no down payment required, but they are only for United States military veterans.<\/p>\n<h3 id=\"usda-loans\">USDA Loans<\/h3>\n<p>The United States Department of Agriculture (USDA) offers no down payment direct loan programs for those who want to purchase multi-family units in rural areas as part of their rural development program.<\/p>\n<h3 id=\"hard-money-loans\">Hard Money Loans<\/h3>\n<p>These loans come from private companies or individual investors. Hard money loans allow you to quickly secure funding without waiting weeks to close a traditional mortgage. You can negotiate terms to some extent, but the ease and flexibility come with a higher rate and a much shorter timeframe.<\/p>\n<h3 id=\"conforming-loans\">Conforming Loans<\/h3>\n<p>These are commonly referred to as traditional mortgages that fall under regulations set by Fannie Mae and Freddie Mac. Unlike FHA loans, you do not have to live in the property to get a conforming loan. However, expect to pay 20 percent down. You can find lower down payment requirement programs if you live in the property as you fix it up.<\/p>\n<h2 id=\"tips-for-real-estate-investing-for-beginners\">Tips for Real Estate Investing for Beginners<\/h2>\n<p>As you are learning how to <a href=\"https:\/\/youngandtheinvested.com\/income-generating-assets\/\" target=\"_blank\" rel=\"noopener\">invest in real estate or other income-generating assets<\/a>, it’s important that you soak up as much valuable information as you can. This will help you avoid common beginner mistakes. The following tips include some of the most important considerations to keep in mind. They apply whether you’re buying rental properties, flipping houses, or investing in real estate online.<\/p>\n<h3 id=\"1-treat-investing-as-a-business\">1. Treat Investing As a Business<\/h3>\n<p>If you aren’t house hacking, you should treat real estate investing as a business. This means getting an Employer Identification Number (EIN) and creating a limited liability corporation or partnership. An EIN is the business equivalent of your Social Security number. If you hold real estate through a business entity, you protect your personal assets if you make a bad investment or get sued.<\/p>\n<h3 id=\"2-follow-the-1-rule-when-you-buy-a-house\">2. Follow the 1% Rule When You Buy a House<\/h3>\n<p>You have to know the numbers when you make a real estate investment. But you might not have the time to crunch for hours or days. You can calculate the one percent rule in your head. Then, you’ll immediately know if you are paying the right price and if it has the potential to be a good investment. If you can rent a home for one percent of your cost of acquisition, it might be a good buy.<\/p>\n<p>The acquisition cost of a house includes the purchase price as well as remodeling, upgrades, cleaning, and anything else you must spend to get the house ready for tenants. For example, imagine buying a condo for $130,000 and spending $20,000 on getting it move-in ready. Your total acquisition cost is $150,000. The one percent rule means you should be able to rent the condo for $1,500 per month; if that’s not what the market suggests is reasonable, it’s probably not a good investment.<\/p>\n<p>Making this calculation is a good way to weed out houses and hone in on those that will give help you succeed.<\/p>\n<h3 id=\"3-use-the-50-rule-to-avoid-overestimating-your-profits\">3. Use the 50% Rule to Avoid Overestimating Your Profits<\/h3>\n<p>As you think about purchasing your first single-family home to rent out, keep in mind that about 50 percent of the rent you collect will go to expenses to maintain the property. Expenses vary but include taxes, insurance, repairs, property management fees, homeowners association (HOA) fees, and much more.<\/p>\n<p>Your profit on a property is the net amount you receive after you make the mortgage payment and pay for expenses. Many new investors forget about expenses when thinking about or reporting cash flow. With the 50 percent rule in mind, you can negotiate to reduce your mortgage payment, try to get a lower purchase price, consider a higher rent, or choose to manage the property yourself.<\/p>\n<h3 id=\"4-dont-overextend-yourself\">4. Don’t Overextend Yourself<\/h3>\n<p>Real estate investing for beginners is all about being cautious. Excited new investors sometimes mortgage their first property so they can afford a more expensive house or building. Leverage is great, but if you financially overextend yourself, you can end up losing the property. Alternatively, you might have to sell it for less than you invested to get out from underneath it.<\/p>\n<p>Invest responsibly and don’t buy into the hype about amassing as much debt as possible and using other people’s money. Instead, start your real estate investing for beginners journey from a place of financial stability. Then you can more easily achieve your income goals. Similarly, you should avoid buying into REITs on margin. You can expect your yield to be lower than your interest rate, and appreciation might not make up the difference.<\/p>\n<\/body><\/html>\n","protected":false},"excerpt":{"rendered":"Real estate has remained a sound investment that can yield large profits for beginners and veterans alike. Even…\n","protected":false},"author":1,"featured_media":5522,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"csco_singular_sidebar":"","csco_page_header_type":"","csco_appearance_grid":"","csco_page_load_nextpost":"","csco_post_video_location":[],"csco_post_video_location_hash":"","csco_post_video_url":"","csco_post_video_bg_start_time":0,"csco_post_video_bg_end_time":0,"footnotes":""},"categories":[204],"tags":[19,69,53,70,71],"class_list":["post-5520","post","type-post","status-publish","format-standard","has-post-thumbnail","category-real-estate-investing","tag-frugal-living","tag-investing","tag-lifestyle-tips","tag-real-estate","tag-real-estate-investing","cs-entry","cs-video-wrap"],"yoast_head":"\n<title>Guide to Real Estate Investing for Beginners - Neighbor Blog<\/title>\n<meta name=\"description\" content=\"Real estate is complicated. Read our guide to real estate investing for beginners to learn about different investments and how to get started.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.neighbor.com\/storage-blog\/guide-real-estate-investing-beginners\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Guide to Real Estate Investing for Beginners - Neighbor Blog\" \/>\n<meta property=\"og:description\" content=\"Real estate is complicated. Read our guide to real estate investing for beginners to learn about different investments and how to get started.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.neighbor.com\/storage-blog\/guide-real-estate-investing-beginners\/\" \/>\n<meta property=\"og:site_name\" content=\"Neighbor Blog\" \/>\n<meta property=\"article:published_time\" content=\"2020-05-06T19:00:20+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2023-09-30T05:43:12+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.neighbor.com\/storage-blog\/wp-content\/uploads\/2020\/04\/Guide-to-Real-Estate-Investing-for-Beginners-Neighbor-Featured-Image.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"915\" \/>\n\t<meta property=\"og:image:height\" content=\"612\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Colton Gardner\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@https:\/\/twitter.com\/coltongardner\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Colton Gardner\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"15 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.neighbor.com\/storage-blog\/guide-real-estate-investing-beginners\/\",\"url\":\"https:\/\/www.neighbor.com\/storage-blog\/guide-real-estate-investing-beginners\/\",\"name\":\"Guide to Real Estate Investing for Beginners - Neighbor Blog\",\"isPartOf\":{\"@id\":\"https:\/\/www.neighbor.com\/storage-blog\/#website\"},\"datePublished\":\"2020-05-06T19:00:20+00:00\",\"dateModified\":\"2023-09-30T05:43:12+00:00\",\"author\":{\"@id\":\"https:\/\/www.neighbor.com\/storage-blog\/#\/schema\/person\/ad4516652d25af57ee2dd17874d0fb38\"},\"description\":\"Real estate is complicated. Read our guide to real estate investing for beginners to learn about different investments and how to get started.\",\"breadcrumb\":{\"@id\":\"https:\/\/www.neighbor.com\/storage-blog\/guide-real-estate-investing-beginners\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.neighbor.com\/storage-blog\/guide-real-estate-investing-beginners\/\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/www.neighbor.com\/storage-blog\/guide-real-estate-investing-beginners\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/www.neighbor.com\/storage-blog\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Guide to Real Estate Investing for Beginners\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.neighbor.com\/storage-blog\/#website\",\"url\":\"https:\/\/www.neighbor.com\/storage-blog\/\",\"name\":\"Neighbor Blog\",\"description\":\"Official Blog of Neighbor.com\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.neighbor.com\/storage-blog\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/www.neighbor.com\/storage-blog\/#\/schema\/person\/ad4516652d25af57ee2dd17874d0fb38\",\"name\":\"Colton Gardner\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.neighbor.com\/storage-blog\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/www.neighbor.com\/storage-blog\/wp-content\/uploads\/2023\/10\/cropped-colton-gardner-small-96x96.jpg\",\"contentUrl\":\"https:\/\/www.neighbor.com\/storage-blog\/wp-content\/uploads\/2023\/10\/cropped-colton-gardner-small-96x96.jpg\",\"caption\":\"Colton Gardner\"},\"description\":\"Colton is a co-founder of Neighbor.com and has written many articles on various topics including RV, car, boat and self storage. He loves spending time with his family and being in the outdoors.\",\"sameAs\":[\"https:\/\/www.neighbor.com\",\"https:\/\/twitter.com\/https:\/\/twitter.com\/coltongardner\"],\"url\":\"https:\/\/www.neighbor.com\/storage-blog\/author\/coltongardner\/\"}]}<\/script>\n","yoast_head_json":{"title":"Guide to Real Estate Investing for Beginners - Neighbor Blog","description":"Real estate is complicated. Read our guide to real estate investing for beginners to learn about different investments and how to get started.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.neighbor.com\/storage-blog\/guide-real-estate-investing-beginners\/","og_locale":"en_US","og_type":"article","og_title":"Guide to Real Estate Investing for Beginners - Neighbor Blog","og_description":"Real estate is complicated. Read our guide to real estate investing for beginners to learn about different investments and how to get started.","og_url":"https:\/\/www.neighbor.com\/storage-blog\/guide-real-estate-investing-beginners\/","og_site_name":"Neighbor Blog","article_published_time":"2020-05-06T19:00:20+00:00","article_modified_time":"2023-09-30T05:43:12+00:00","og_image":[{"width":915,"height":612,"url":"https:\/\/www.neighbor.com\/storage-blog\/wp-content\/uploads\/2020\/04\/Guide-to-Real-Estate-Investing-for-Beginners-Neighbor-Featured-Image.jpg","type":"image\/jpeg"}],"author":"Colton Gardner","twitter_card":"summary_large_image","twitter_creator":"@https:\/\/twitter.com\/coltongardner","twitter_misc":{"Written by":"Colton Gardner","Est. reading time":"15 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/www.neighbor.com\/storage-blog\/guide-real-estate-investing-beginners\/","url":"https:\/\/www.neighbor.com\/storage-blog\/guide-real-estate-investing-beginners\/","name":"Guide to Real Estate Investing for Beginners - Neighbor Blog","isPartOf":{"@id":"https:\/\/www.neighbor.com\/storage-blog\/#website"},"datePublished":"2020-05-06T19:00:20+00:00","dateModified":"2023-09-30T05:43:12+00:00","author":{"@id":"https:\/\/www.neighbor.com\/storage-blog\/#\/schema\/person\/ad4516652d25af57ee2dd17874d0fb38"},"description":"Real estate is complicated. Read our guide to real estate investing for beginners to learn about different investments and how to get started.","breadcrumb":{"@id":"https:\/\/www.neighbor.com\/storage-blog\/guide-real-estate-investing-beginners\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.neighbor.com\/storage-blog\/guide-real-estate-investing-beginners\/"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/www.neighbor.com\/storage-blog\/guide-real-estate-investing-beginners\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/www.neighbor.com\/storage-blog\/"},{"@type":"ListItem","position":2,"name":"Guide to Real Estate Investing for Beginners"}]},{"@type":"WebSite","@id":"https:\/\/www.neighbor.com\/storage-blog\/#website","url":"https:\/\/www.neighbor.com\/storage-blog\/","name":"Neighbor Blog","description":"Official Blog of Neighbor.com","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.neighbor.com\/storage-blog\/?s={search_term_string}"},"query-input":"required name=search_term_string"}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/www.neighbor.com\/storage-blog\/#\/schema\/person\/ad4516652d25af57ee2dd17874d0fb38","name":"Colton Gardner","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.neighbor.com\/storage-blog\/#\/schema\/person\/image\/","url":"https:\/\/www.neighbor.com\/storage-blog\/wp-content\/uploads\/2023\/10\/cropped-colton-gardner-small-96x96.jpg","contentUrl":"https:\/\/www.neighbor.com\/storage-blog\/wp-content\/uploads\/2023\/10\/cropped-colton-gardner-small-96x96.jpg","caption":"Colton Gardner"},"description":"Colton is a co-founder of Neighbor.com and has written many articles on various topics including RV, car, boat and self storage. He loves spending time with his family and being in the outdoors.","sameAs":["https:\/\/www.neighbor.com","https:\/\/twitter.com\/https:\/\/twitter.com\/coltongardner"],"url":"https:\/\/www.neighbor.com\/storage-blog\/author\/coltongardner\/"}]}},"_links":{"self":[{"href":"https:\/\/www.neighbor.com\/storage-blog\/wp-json\/wp\/v2\/posts\/5520","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.neighbor.com\/storage-blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.neighbor.com\/storage-blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.neighbor.com\/storage-blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.neighbor.com\/storage-blog\/wp-json\/wp\/v2\/comments?post=5520"}],"version-history":[{"count":1,"href":"https:\/\/www.neighbor.com\/storage-blog\/wp-json\/wp\/v2\/posts\/5520\/revisions"}],"predecessor-version":[{"id":9310,"href":"https:\/\/www.neighbor.com\/storage-blog\/wp-json\/wp\/v2\/posts\/5520\/revisions\/9310"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.neighbor.com\/storage-blog\/wp-json\/wp\/v2\/media\/5522"}],"wp:attachment":[{"href":"https:\/\/www.neighbor.com\/storage-blog\/wp-json\/wp\/v2\/media?parent=5520"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.neighbor.com\/storage-blog\/wp-json\/wp\/v2\/categories?post=5520"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.neighbor.com\/storage-blog\/wp-json\/wp\/v2\/tags?post=5520"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}