Real estate investment is pretty old-school, albeit a guaranteed money-making machine. A lot has changed in this sector and will change as we embrace different technologies and face market shifts. While people have made fortunes by investing in the real estate sector, many have stayed reluctant even to dip their toes only because of the obscurity surrounding it.
Alas, real estate investment is not rocket science. And with little help and guidance, even a novice investor can make a million dollars. However, real estate has evolved massively, especially since the pandemic of 2020. While land is still a finite commodity and holds an intrinsic value, scenarios impacting the whole equation have altered significantly. The buyer behaviours have changed, the target consumer base has expanded, and most of all, the dreaded pandemic has compelled us to take a different route altogether. That’s why we have formulated a guide for novice investors on investing in real estate.
Step-by-Step Guide to Real Estate Investment
1. Real Estate in 2022
All of us have a sore memory of the housing market crash of 2008. It is perhaps one of those reasons many people are hesitant even to consider investing in real estate. However, the market is not all doom and gloom anymore. And despite the pandemic, there is a sense of optimism. Recently, economists at Relator.com revised their forecast, saying the median sales price appreciation on existing homes is likely to touch 6.6.% in 2022, rising from 2.9% in 2021. Considering inflation, which has been the highest in the last four decades, the real estate market is likely to boom. However, there’s a catch. In order to make a fortune in real estate, one should be aware of different investment options in the market.
2. Types of Real Estate Investments
One great thing about real estate is it offers you different investment channels. Let us see how.
A. Residential Real Estate
When someone says “real estate”, we immediately think of a house. And it’s obvious because residential real estate is probably the most widely known and understood real estate investment. However, there are a few options in that too. For instance, one could invest in single-family homes, or you could choose multifamily houses or simply apartment spaces. The demand for affordable housing has increased dramatically in the US, with the “housing crisis” being the face of it. Thus, investing in residential real estate is one good option for you as an investor.
B. Commercial Real Estate
Commercial real estate properties require significant capital, and thus, they also provide notable returns. However, investing in this particular channel requires market understanding and a handy wallet to splash the dollars. However, the upkeep is not as risky as it is in residential real estate. Since commercial units are rented to businesses, the relationship between the owner and renter remains more professional.
Other investment options are real estate trust investment (REIF Fund), buying raw land, and real estate crowdfunding. Understanding their pros and cons would simplify real estate investment for first-time investors.
3. Why Real Estate?
Franklin D. Roosevelt once said, “real estate cannot be lost or stolen. It is the safest investment in the world”. There are a plethora of reasons why you should invest in real estate. For instance, it provides
- Steady cash flow
- Great returns
- Long-term security
- Tax advantages
- Passive income
- Protection against inflation
- Fulfilment and control
4. Dos and Don’ts in Real Estate Investment
So far, you learned about why real estate and possible prospects to invest in real estate. Now, let us discuss things to avoid and things to focus on while investing in real estate. Here is your list of dos and don’ts.
- Take time to analyze all options available before entering a deal. Don’t rush into loss-making deals.
- Conduct your market research and understand potential returns from the residential unit. Don’t get overdriven by motions.
- Don’t buy a second property until your first is making you money.
- If you plan to manage, purchase a new property close to your home.
- Don’t buy without title insurance.
It’s a no-brainer that real estate investment is a must-have strategy in your portfolio. It is the safest and smartest investment one could make in today’s scenario. However, it is always good to have someone to give you the right direction and sound advice when travelling in uncharted territory.
Homz Fund is the first-ever national multi-family housing fund in the US. It is developing wellness-centric multi-family housing communities through its sister company Homz Global. Homz Fund is backed by the US treasury bond, which means your capital receives principal protection. So, if you are a novice or seasoned investor looking to invest in real estate, Homz Fund is the place for you.