So you would like to be a real estate investor? Real estate investing is a sure-fire way to create, maintain, or grow wealth- not only for yourself but for future generations as well. I guess you are wondering how to get started in the land of real estate. There are so many ways to invest in real estate that one article is doing an injustice to this critical asset class. Before I get into a quick down and dirty rundown, I have to lay out this disclaimer. Reading books is THE #1 way to invest in any asset class properly. I will leave a list of books to read below the article. I will tailor the list in my recommended order to read them in. You will need to learn how to use leverage. As much as you think that reading an article and watching a YouTube video will prepare you for this grand endeavor, these are just informational points on a map. Reading a book is education. An article or video is knowledge. Reading books will assist you in creating a corporation, getting funding, and becoming a property manager. These are all parts of the overall lifestyle of real estate investing. Read as many books as you can. If you are not willing to read books, you are not ready to become a real estate investor.
Now, let’s get into some different ways to get into real estate. I will start with the simplest to the more complex methods. These are just some of the ways, not all of them. Remember to read books. Some other ideas are billboards, raw land, and mobile homes. Let’s get into some different ways to invest in real estate:
1) House Hacking / Renting Rooms
Renting rooms is literally my favorite way to get into real estate investing. This is the fastest way to generate income with almost zero overhead. All it takes is a willingness to work with other people. If you are young and single it is even easier. Most Americans are not willing to share their residence. However, most Americans are also broke. “If you want what everyone else has, do what everyone else does.” I thought I knew what having money truly was before I started renting rooms. We paid all of our bills and had some money left over. But once you start renting rooms you will see how real money works. Once you get that taste of passive income, it will change your life forever, trust me. In November 2020, my wife and I were able to invest $6,000 into our investment portfolio. Plus we were able to still enjoy our life. I even bought a couple of videogames. This is my most recommended method to invest in real estate. We’ve collected $15,000 this year from renting out rooms. Not bad at all.
2) Crowdfunded Real Estate Investment Trust
This is an investment platform called Fundrise. I have been investing in Fundrise since September 2019 and I currently have about $5,000 invested. Fundrise pools money together from small investors, like me, and invests it into real property. They can do this by purchasing properties or by loaning the money to real estate developers with interest-bearing loans. For our invested money, we then get paid dividends. I chose the high income (dividend) portfolio which is more focused on income than capital appreciation. If you like large capital gains, there is a portfolio for you. My dividends are about $50 every quarter, or about $200 a month. I plan on getting my Fundrise portfolio to around $100,000, which would pay me about $4,000 a year. Fundrise is completely stress-free and no maintenance. It is also a great way to diversify outside of the stock market. The main caveat is that you will not be able to pull your money out quickly. It will probably take 3-6 months to get your money returned to you upon request. Remember real estate is a highly illiquid asset class.
3) Real Estate Investment Trusts (on the stock market)
REITs are just like Fundrise, except they trade on the open stock market. REITs, by law, have to pay a majority of their profits to shareholders. This means that their dividend yields are usually higher than other common stocks. There are many types of REITs, for example, residential mortgages, data centers, and apartment buildings. Do not invest in REITs until you know what you are doing. For example, Mall REITs had a hard time during the pandemic. You had better know which one of your REITs is a mall REIT. Hoya Capital Real Estate is the place where I go to get the low down on REITs. It is a newsletter and they also post it on SeekingAlpha.com. Here is a sample https://seekingalpha.com/article/4391831-housing-shortage-gets-worse. Join their newsletter and get super-smart on REITs. The good part is that you can invest in REITs via the STASH app or other similar platforms. My favorite REIT is AGNC. I invest $5 a week into it. I currently have $530 invested in AGNC on STASH. It pays me $4 a month or $48 a year. That is a 9% return on investment, plus the price has appreciated 12%. I have no complaints. These REITs can be sold in milliseconds and money back in your account in 2 days.
4) Single Family Residential Homes
I currently own 3 homes. These can be a little more tricky to get into. If you are active duty military or a former military person, then you have access to the VA loan. This is the greatest builder of wealth that there is. Remember, if the VA maximum is say $470,000, you can buy as many properties as you can under that limit. So you could potentially buy 4 homes for $115,000 each. Also remember, that you will need to live in each house for at least 2 years. Most people go off and purchase their dream home and live there as a single-family. I recommend doing the exact opposite. Buy a small starter home. On top of buying a home, for say $200,000, still house hacks the crap out of it. Meaning, get a roommate, or build an addition. Whatever it takes to generate more income. When your two years are up, buy another home with the same specifications. Your first home should be rented at $500 a month profit and you are still house hacking. Once you are done with those two homes, you can buy another home with a conventional 20% down payment. Ensure your 3rd home has either double master suites, an in-law suite, a FROG (finished room over garage), or a finished basement. Yes, even in your third home, you will need to hack it. Remember, the more money you invest, the faster you retire and live a really good life. It is called delayed gratification. The best book to read on this is- Build a Rental Property Empire – Mark Ferguson https://amzn.to/38rUdOB
5) Multi-Family Residential Homes
These are duplexes, triplexes, and 4 unit homes. Rinse and repeat from the single-family homes, except you will live in one unit while others live in other units.
6) Multi-Family Commercial Residental Apartment
I have not bought an apartment building yet, but I know how to. I know how to get funded and purchase a complete building. I have even been eye-balling one near my home in Florida. However, being in Japan, it is not my time. But by reading, I am able to comprehend how average people, like me, can buy apartment buildings. A great resource for buying an apartment building is- Zero Down – Monica Main – https://amzn.to/2GSMjlB
As you can see, real estate is a huge asset class. This is only a drop in the bucket of what is out there. There is also commercial real estate, billboards, notes, hard-lending, etc… Remember to read, read, read. If you are not willing to read, you are not ready to invest. Buying homes and renting rooms is extremely easy, but you have to know what you are doing and what to look for. You have to talk the talk and walk the walk. If they smell a sucker, you will get taken as a sucker. Educate yourself. As promised, here are some resources in the order I would read them in. Not all of them are directly about real estate but pertain to the overarching theme of passive income.
Please drop me a comment below. Tell me what your plan is and how you will begin your journey. Share with like-minded people. Thanks for reading.
Rich Dad, Poor Dad – Robert Kiyosaki – https://amzn.to/3lfht5s
Rich Dad’s Guide to Investing – Robert Kiyosaki – https://amzn.to/36wrlDN
Build a Rental Property Empire – Mark Ferguson – https://amzn.to/38rUdOB
Deals on Wheels – Lonnie Scruggs – https://amzn.to/2Ir5Pa2
10 Other Real Estate Investments You Could Do – Micheal Lantrip – https://amzn.to/3kjbkV7
Zero Down – Monica Main – https://amzn.to/2GSMjlB
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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