Investing in real estate is a proven way to earn great returns and pursue financial freedom, except for retirement. Accessing many of the benefits of real estate investments is not difficult, but it requires a little more planning and work than other types of investments. You cannot open the app and purchase properties in a single click. However, this process does not have to be complicated or stressful.
This guide provides an overview of how to get started as a real estate investor.
Why real estate investment?
Before discussing the logistics of how real estate investments are purchased and run, let’s explain why this asset class should be considered in the first place. If real estate investment is more work than some other asset classes, why do you do it? What benefits do private property ownership have on other investments?
There are six benefits to consider.
Cash flow
Cash flow is the profit generated from the real estate business after subtracting all expenses. They usually earn monthly and can be used to reinvest in their portfolios, invest in other assets, or fund their lifestyle. Other asset classes, such as dividend stocks and bonds, offer cash flow opportunities, but potential returns are much higher in real estate. Over time, many real estate investors can completely replace income from their work with cash flow from their real estate.
Thanks
On average, home prices in the US increase in annual value by around 3.5%. In fact, home prices nationwide increased by 4.1% in January 2025 from the previous year. As a property owner, this can drive a large return, especially if you use leverage (using a mortgage to buy the property). Thanksgiving is taxed at a lower tax rate than your regular income. And if gratitude occurs in your main residence, it is often not taxed at all.
Added value
This is a great opportunity for a fairly unique profit for real estate. When you buy an old property as an investment, you can renovate and improve it, thereby increasing the value of the home. This helps to drive greater profits at the time of sale, but it can also increase what tenants are willing to pay with rent and then increase cash flow. There is no such option when purchasing stocks, bonds or cryptocurrency.
Amortization
This is a flashy term for paying off your mortgage using the income your business generates from rent. That may not sound much, but you can add 2% to 4% annual revenue from paying your mortgage on time.
Tax benefits
The US government has enacted several laws encouraging homeownership and property investment. For example, depreciation can be used to offset the tax burden on rental cash flows, to use cash-out refinances to raise stocks from tax exemptions on fixed assets, or to exchange 1031 without paying capital gains tax. Use it to trade with larger real estate.
Low volatility
Compared to the frequent highs and lows in the stock and cryptocurrency market, real estate is a very stable asset class, with only one real “crash” in the past 60 years. Like all investments, real estate investments still have risks, but risk-adjusted returns are excellent.
Investment Type
Real estate investment is a wide range of categories. So there are a number of ways to invest. Each strategy has its own strengths and weaknesses, and it’s up to you to decide which approach is best suited to your goals.
Below are four of the most common ways to get involved in real estate investment:
Rental Properties
Rental properties are the most common type of real estate investment and are relatively simple business. Investors buy real estate and lease space to long-term tenants they find on Redfin or other listing platforms.
Rental properties are generally considered low risk, but still offer very long-term benefits. It’s a stable and proven business model that works in almost every US market, especially if you’re willing to try out a highly beneficial owner-occupied strategy called house hacking.
Short-term rental
Short-term rentals are both real estate investment and hospitality business. This strategy requires you to purchase a property, provide it, then rent it to a guest who uses the property for a limited time (after finding it on Airbnb, VRBO, or similar websites) . This strategy offers significant revenue generation potential, but requires a more proactive approach to managing your investment.
House Flip
Flip is when investors buy and improve the property that is best and not the best use. This strategy can be very advantageous if it works, but it takes time and has a considerable level of risk. Renovating your home can have many issues, but if you can pull it apart, there are quite a few benefits.
Advanced Strategies
Real estate development and commercial real estate can be the best assets to invest in, but are usually the most booked for investors who want to work hand in hand with some of the simpler strategies to expand their portfolio. Masu.
Other considerations
In addition to choosing your investment strategy, there are a few other questions to consider before finding your first property and investing. There is no correct answer. Just a few considerations to consider before investing.
effort
You may hear real estate called passive income opportunities, but that’s pretty much true. Generating income from real estate is generally less involved than starting a full-time job or business, but it still requires work. The amount of work you put in is largely up to you.
You won’t pay attention to buying properties with good shapes, but you can get a lower return. But if you are willing to spend a lot of time, you can really maximize your return.
risk
While the national housing market tends to be stable, regional markets and individual properties each pose their own risks. Consider your financial situation, think hard about how comfortable you are to take and what level of risk you are responsible for. Don’t invest or risk the money you need to cover the basic expenses and money you need to access quickly. Real estate is a relatively illiquid asset. This means that if you need access to capital, it will take weeks or months to sell the property.
Property Management
Who manages your property every day? Many local investors choose to manage their property. This is because it helps maximize returns and is usually only needed a few hours a month.
For those who are busy or investing in the market beyond, try to find a great real estate manager who takes tenants’ safety and satisfaction seriously and takes business interests seriously. If you want to access this route, make sure you have a budget for a real estate manager (usually 8%-10% of revenue) when analyzing your transactions.
How to get started
Starting as a real estate investor doesn’t have to be complicated, but it requires some foresight and planning. Below are five steps you can follow to land your first real estate investment.
Develop a vision
Think about the amount of capital you want to invest, the type of investment you want to make, and the level of risk you’re comfortable with. There are many exciting ways to invest in real estate. Is this best matched with your personal preferences and vision of the future? The investment strategies and considerations listed here can be used as a starting point for developing your vision.
Choose the market
Most investors choose to start by investing in their city or town, but they don’t need to. All real estate markets are different. Some are more expensive and offer great appreciation, but with very little cash flow. Others offer strong cash flow and are affordable. Identify the right market for your vision and suit your investment preferences.
Build a team
It may not seem like that, but real estate is a related business. Every investor should dress up as an investor-friendly agent, lender, trustworthy contractor, and, for some, a real estate manager.
Interviewing some candidates before selecting a team you feel confident in can help you manage your investment well. Once you find an agent, ask them to begin submitting potential properties to review.
Analyze the transaction
Now it’s time to do math. Not all real estate invests in strong investments, it’s up to you, the investor. This requires you to dig into the property value, rental possibilities and average costs in your area to understand how your transaction may be carried out.
If this sounds tough, don’t worry! Transaction analysis is not difficult. There are also resources like BiggerPockets Investment Calculator, which can help you calculate numbers right away.
I’ll jump
Even after running the numbers and seeing how good the deals you find are, it’s difficult to jump in and make your first investment. But you can build a great team and analyze your transactions accurately and feel confident.
Investing in real estate is a big decision. If you need some external feedback on your transaction or decision, reach out to local investors or members of BiggerPockets on the BiggerPockets forum, who can help you with your journey. You’ll be surprised at how helpful real estate investors can be to each other.
The Beginning of Real Estate: The Final Thoughts
Real estate is a stable, profitable asset class that can be customized based on your individual goals and preferences. And most of all, it’s not that difficult to get started. You can develop your vision, consider strategic options, and take the time to follow the steps listed here to realistically own your first real estate investment and move into economic independence in the next 90 days. If you need help with your real estate investment journey, visit BiggerPockets to join a cozy community of over 3 million people and help each other achieve financial freedom through real estate investment.
