Investing in Real Estate: 4 Tips for Beginners

Investing in Real Estate: 4 Tips for Beginners

  • Karine Sewart
  • 06/22/23
Investing in real estate can be one of the most exciting yet intimidating things you will ever experience. It is one of the most stable forms of passive income, and real estate can also build multi-generational wealth for you and your family. There are so many benefits to building a healthy investment portfolio. That said, knowing where to start can be overwhelming if you do not have a lot of experience with buying or selling real estate. What are the different types of real estate investment options, and how do you know which option is right for you? How do you ensure success? From financing to timing, here's everything you need to know about investing in Mequon real estate.

Types of real estate investment

If you are considering investing in real estate, you are likely aware of some different types of investment properties out there. Whether it's rental properties or house flips, the possibilities are endless. So, how do you know what type of property you should invest in? Here are some of the most common ways to invest in real estate, as well as the pros and cons of each approach.

Buying your own home

While it might not seem like it on the surface, buying a home is one of the best ways to invest in real estate, especially as a beginner. As a first-time or novice homebuyer, you can build equity on your property and see your property become more valuable over time, giving you extra leverage if you want to buy additional real estate properties later.

Buying a home as your first investment property can also help you understand what homeownership is like. If you go this route, you can buy a single-family home, a townhouse, or a condominium. For extra monthly income, buy a house with a basement unit. The rental income will help you pay off your mortgage.

Rental property

Outside of owning your home, rental properties are one of the most popular ways people invest in real estate. It's an arrangement where you own the property, and your tenant will pay you rent in exchange. There are many types of rental properties, including single-family homes, multi-family homes, and multi-unit rentals.

The type of rental property you choose will depend on how much money you have to invest and how much work you want to put into being a landlord. If you buy an apartment complex, for example, you will have a much larger workload than someone who owns only one rental property in Mequon real estate. Still, many landlords offset this by hiring property managers. Rental properties typically have long-term tenants, with leases lasting up to a year or more. You can also do month-to-month lease agreements.

Vacation rentals

Similar to a rental property, a vacation rental allows you to lease your property to a tenant. Unlike typical rental properties, however, rental properties are typically short-term agreements, with tenants staying on your property anywhere from one night to a few months. Vacation rentals are also seasonal since most of your rental income will come from people who are — you guessed it — vacationing.

That said, you can charge a premium for vacation rentals, especially if you have a stunning luxury property set along gorgeous Lake Michigan. This approach is ideal if you don't want the maintenance that comes with long-term tenants and if you are financially stable enough that you don't need to rely on consistent rental income to pay your mortgage during the off-season.

House flipping

This investment strategy involves purchasing a property, renovating and upgrading it with modern touches, and selling it for a profit. The home is purchased solely as an investment source rather than being lived in by the owner. Homes suitable for flipping for profit are typically “fixer-uppers” that need plenty of work and repairs. However, you could also purchase a property, hold onto it for several months, and “flip” it once its value rises with the market trends.

Tips for your investment

1. Consider your investment goals

Are you trying to decide what type of real estate investment is right for you? Consider your investment goals. Do you want to own multiple apartment complexes and multi-family properties, or are you interested in renovating homes and flipping them for a profit?

Your real estate goals will heavily dictate what your investment portfolio will look like. Many investors like to diversify their portfolios, taking on multiple sources of income. Start with what you can manage financially and emotionally and take it from there.

2. Research the area you want to invest in

Once you have committed to real estate investment, you need to do everything you can to ensure your investment will appreciate. One of the most important things you can do is research your local real estate market. After all, the last thing you want is to invest in a stagnant real estate market. The key is to invest in an emerging area where property values are increasing. If you buy a property in Mequon real estate, you will find just that.

3. Understand the costs upfront

Buying a property may seem straightforward, but there are a lot of added costs that can eat away at your finances quickly. Budget for a contingency fund, along with the down payment, closing costs, and other expenses associated with purchasing a property. If, for example, you recently purchased a flip property, there could be a lot of underlying structural issues that will cost thousands of dollars. Don't skimp on structural integrity just to cut corners! Doing so could land you in hot water later. Get a home inspection done before purchasing a property. Doing so could save you from buying a money pit.

4. Don’t take on more than you can handle

If you're excited about investing in real estate, it can be tempting to hit the ground running immediately. Perhaps you found the perfect investment property with a high ROI or a distressed property in an upscale neighborhood. Before you invest, tread lightly. The biggest downfall of any novice real estate investor is taking on more than they can handle financially or emotionally. Understand your strengths and limitations. Don't buy an apartment complex if you don't have the time to be a full-time landlord and have the funds to hire a property manager. You will only set yourself up for stress and potential failure. Consider your current lifestyle and financial situation and find an investment property that's right for you.

Invest in Mequon real estate today

Are you ready to get started with your real estate investment? Whether you're buying your first single-family home or multi-family unit, you need an experienced real estate expert by your side. With her top-notch reputation for insightful expertise and efficiency, Realtor Karine Sewart and her team at Sewart Group will provide you with the real estate education and resources you need to achieve your investment goals. Contact Karine today to get started on your property search.

*Header photo courtesy of Shutterstock

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