Property Investment for Beginners: Top 10 Tips
Real estate is one of the best investment sectors if you want to increase wealth and build a legacy. Property investment for beginners is a much less daunting type of investment than stock investment, mainly for two reasons: Most people have purchased their primary home and are familiar with the property purchase process. Also, property value in the U.S. has climbed consistently since the 1960s, so real estate is a lower-risk investment.
For these reasons and others, we highly recommend investing in property for beginners ready to build their investment portfolio. If that’s you, we’ve put together the top ten tips in property investment for beginners to help get you started!
10 Tips for Investing in Property for Beginners
- You don’t need to be an “investor” to invest in real estate. If you bought a house, congratulations! You’re already a real estate investor. Don’t avoid investing in real estate because it’s intimidating, and if you’re still worried, contact us. We’ll help walk you through it till you feel confident.
- Before investing in real estate, clarify your goals. Beyond what you can afford and where you want to buy, ask yourself: What exactly do you want to get out of this investment? Do you want to live in your investment or rent it out? If renting, can you handle landlord duties, or should you get a property management company? How long do you want to own the property, and is it a good option for flipping or a quick resale? Etc.
- Choose a real estate option that works best for your goals. Three common types of property investment are Primary Homeownership, Property Rental, and House Flipping. Other options include REITs (real estate investment trusts), REIGs (real estate investment groups), RELPs (real estate limited partnerships), and real estate mutual funds. You can learn more about these options here.
- Real estate is a flexible investment because it comes with options. You can live on a property, rent it out, fix it up, hold it long-term or sell it quickly. Property investing for beginners is the perfect option since it’s hard to anticipate how your life (and goals) might change over long periods of time.
- Rental properties are excellent investment opportunities, providing both regular income and long-term equity growth. The double potential for wealth accumulation is why it’s one of our top recommendations in property investing for beginners.
- Work on improving (or maintaining) a high credit score even before you begin looking for investment opportunities. If you’re looking for a lender to help finance your investment property purchase, keep in mind: “To qualify for a conventional loan, you’ll typically need a credit score of at least 620. Borrowers with credit scores of 740 or higher can make lower down payments and tend to get the most attractive conventional loan rates, however.” ~ NerdWallet
- You can increase your return on property investment by refinancing the loan at better (lower) interest rates. A lower interest rate reduces mortgage payments and increases the profit from rental fees.
- Pull out money as your equity increases to invest in other property. A cash-out refinance gives you cash from your current property that you can use to invest in other property. However, be careful not to overextend your finances. Ensure you can cover all costs if something unexpected happens (long break between tenants, significant repairs, market crash, etc.).
- Consider “house hacking” if you’ve got a limited budget. “House Hacking is a strategy that involves renting out portions of your primary residence to generate income that is used to offset the cost of your mortgage and other expenses associated with owning a home.” ~ Forbes
- Don’t be afraid to ask for help. Property investment for beginners can be tricky and may involve regrets if you don’t know the market, crunch the numbers, and calculate options. Be aware that there are professionals who are happy to answer any questions and provide guidance in investing in property for beginners (like the experts at KPT)!
We’re Here to Help with Property Investing for Beginners
If you’re interested in increasing your wealth and building a stable legacy for years to come, get started by investing in the real estate sector. It’s a beginner-friendly investment opportunity, and we are a beginner-friendly real estate team, so contact us when you’re ready to start!