Beginner's Guide To Real estate Investing: An Overview

New to the real estate investment world and wondering how to start investing in real estate? First of all, your decision to invest in real estate is the right one. Real estate business is very lucrative and stable. Anyone one can invest in real estate. 

You do not need a degree in real estate investing to get started and succeed, neither do you need to be an expert sales person to become a real estate investor. Understanding the fundamentals, economics, and risks of real estate investing is enough to get you started. 

This guide will provide an overview of real investing, the basics of real estate investing, and common mistakes to avoid.

Real Estate Investing for Beginners

Real estate investing can be as simple as acquiring a property and renting it out to create a steady cash inflow. But there are other types of real estate investments that might be a bit complex. Examples include residential real estate, commercial real estate, industrial real estate, and real estate that trades on stock exchanges. 

When you invest in any business, the idea is to make your money work for you so you can earn residual income. The same rule applies when you invest in real estate. You have to ensure that the returns you make are more than enough to cover the risk, taxes, the cost of providing utilities, as well as maintenance and insurance cost. 

The basic formula for success in real estate business is: 
1) buy properties.
2) rent or sell them at higher prices to make enough profits so that you can afford more properties.
3) buy more properties with your profit and repeat the cycle again.

How To Make Money From Real Estate

Below are seven ways to make money from real estate:

1. Income From Rents: 

You can make money in real estate by buying or building real estate properties and renting them to tenants, enabling you to generate income from the rent they pay. 

Properties suitable for this type of real estate investment includes buildings with many flats, warehouses, office buildings, land and more. For example, you can buy a warehouse for ₦50,000,000 and rent it to businesses at ₦15,000,000 per year. 

2. Real Estate Value Appreciation: 

Here, you make money from buying real estate properties, like a land, at a cheap price and selling them at a higher price when the property appreciates in value. 

For instance, you buy a land at Badagry for ₦200,000. One year later, a University is built near the location of the land, increasing the demand for land. You can sell the land at ₦1,000,000 or more depending on the prevailing real estate market conditions.

3. Buying and Refurbishing Real Estate Properties: 

Investors also generate income from buying properties at extremely cheap prices, renovating or upgrading them to make them appealing to potential buyers, and then sell or rent them at higher prices. 

4. Real Estate Brokerage Fees: 

You can enter the real estate industry as a specialist such as a real estate broker, and earn through commissions from buying and selling properties. A real estate broker can receive 10% of the price of a property for helping clients to buy or sell a property.

5. Setting Up a Real Estate Management Company: 

You can also make money from establishing a real estate management company, and earn a percentage of rents or sales in exchange for running the operations of a property. Imagine how much you can make from receiving 3% of whatever money a hotel makes, for managing the daily running of the hotel.

6. Building Hotels and Event Centers: 

This is a great way to make money from real estate, especially in high tourist locations. You can accommodate visitors in your hotel and offer them hospitality services. There are events happening almost every day of the week, especially on weekends. People will pay huge to use halls and gardens in your event center for wedding parties, meetings, and so on. 

7. Buying Shares in a Real Estate Investment Trust (REIT): 

If you do not want to actively participate in the real estate market, you have the option of investing in a REIT or a Mutual Fund. That way, you have your money working for you while you focus on other businesses.

The Best Type of Real Estate Investment

There are several types of real estate investments to choose from. Your choice of real estate investment should be based on several factors like your knowledge of the real estate market, availability of funds, the amount of time you are ready to put into the investment, and so on. 

To help you decide, read our article providing an overview of the different types of real estate investments available.

How to Fund Real Estate Investment Properties

After deciding on the type of real estate investment you want to make, the next question is how do you fund it. You can buy a property from your savings or take out a mortgage (simply a loan) from a bank or a building society. 

You should be careful though when taking out mortgages., as the market value of your property might not be enough to cover the interest you pay on the loan. 

Before purchasing a property, it is advisable to do a thorough research on the possible return you can earn from it. Take into consideration the type of property, the location of the property, the potential of the property's value rising, if you are going to spend more money renovating or developing it before you can sell it, and so on.

This is just an overview of real estate investing. It is always advisable to seek professional counsel before investing in any business or making any business decision.