Financial Tricks to Invest Right in Real Estate

Tuesday, February 7, 2017, 6:00 AM | Leave Comment

Real estate investing has grown in popularity as a less volatile alternative to the economic uncertainty of the stock market.

But newcomers to real estate investing often feel uncertain about how or where to jump in. 

Luckily, learning how to invest in real estate is no different than learning any other new skill. What you need is a lot of research and a plan. Here, it can help to learn from others who have already become experts at real estate investing.

In this post, learn time-tested financial tricks to make sure you make good investment choices from the start. As you learn more you can talk to others in the industry and see what else you can get started in with your real estate investing.

Financial Tricks to Invest Right in Real Estate

  • Invest in a Real Estate-Based Fund or Investment Trust

    If you don’t have the capital to begin buying properties, the next best way to dip a toe into the real estate investing market is to buy shares in a real estate fund or real estate investment trust (REIT).

    With either option, you can dip a toe (or 10) in the real estate investment market, build your research skills, and take the benefit of having a professional at the helm of your real estate investment.

  • Practice by Buying Your First Home

    Many home buyers (whether first-time or experienced) pick out a home to buy based purely on personal preferences.

    While this is a good way to end up living in a home you love, it is not quite the same thing as buying a home for investment purposes.

    If you happen to move into your investment home for a time, so be it. But with an investment property your goals are more long-term.

    You are looking for an up-and-coming neighborhood with good amenities and services (or great potential in this year). You want a home in a community where property values are increasing and jobs are plentiful.

    By using your own home purchase to practice looking at real estate as an investment, you can gain skills that will help you add to your real estate portfolio over time.

  • Try Rentals

    Be sure any investment rental property will produce positive cash flow out of the gate.

    Regardless, you will be expected to begin making your mortgage payments right away and you may also face additional expenses for homeowners insurance, aesthetic upgrades, minor repairs, property taxes, homeowners association fees and more.

    Here, you don’t want to gamble that you can quickly turn any property into a cash cow. Rather, you want to purchase a property that is already poised to generate positive cash flow (profit) above and beyond your total expenses and mortgage payment each month.

    The very best way to achieve this is to find a property that already has good tenants who want to stay (and can absorb any rent increase you may need to institute).

  • Buy as a Corporation Instead

    Establish a limited liability corporation or trust to purchase the real estate on your behalf.

    The value in taking this approach is that you and your other non-real estate-related assets are then shielded from any real estate losses or lawsuits you may encounter.

    By setting up a company or trust, only the company’s assets are accessible in the event your investing goes south.

These tricks represent only the tip of the iceberg of what you will learn on the road to becoming a real estate investment expert.

By studying what successful real estate investors have done, carefully researching each property option before you buy, and learning the ropes of keeping each property cash positive over the long term, you will slowly become a real estate investing expert in your own right!

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