You already know that real estate is a great investment, and you know that you want to add this tangible asset to your portfolio. If you’re like a lot of newer investors, though, you’re probably wondering how to start investing in real estate to diversify your portfolio and bring in more passive income for both the short and long term.
A lot of real estate professionals will tell you that you absolutely must have a full education in the real estate industry before you start investing. If that were the case, you would only see real estate professionals investing in real estate, and that is obviously not the case.
The “experts” do have a point, however. You should not go into real estate investing blind, and you should have some familiarity with the types of investments open to you and the markets you’ll be investing in. However, you do not have to spend two or more years of your life learning all there is to know about real estate before making your first investment.
Real Estate Investment Trusts
The easiest way to start investing in real estate is probably to buy shares in an REIT (real estate investment trust). An REIT employs real estate experts to find and purchase lucrative properties, using the investment capital of people who’ve bought shares in the trust.
With this form of passive investment, you’ll basically be investing in real estate the same way you would invest in the stock market. You buy shares at an optimal rate. Your capital buys you equity in the property or properties that your REIT owns, and you get a percentage of the profits on those properties each quarter. Then, as your shares become more valuable, you can decide to buy more, make a new investment, hold, or sell them.
As with all investments, there is some risk involved with buying stock in an REIT. Namely, you must trust that your REIT will make good investment decisions with your money. If you find an REIT with capable experts who know their markets and are known for making good investments, then you have little to worry about. So, how can you find the right REIT?
Attend Real Estate Networking Events
Whether you decide to devote the time necessary to gain a full understanding of the real estate markets you’re investing in or not, it pays to build relationships within the industry. Attending real estate networking events is a great way to do this, as you can gain more exposure to different aspects of the industry and network with other investors who’ve worked with REITs and real estate investment clubs in your area.
Join a Real Estate Investment Club
Real estate investment clubs are also a great place to begin when you’re learning how to start investing in real estate. A good club will attract quality speakers and will generally charge no more than $200-300 per year. Before you commit to joining a particular club, attend two to three meetings, and get an idea of who the members are. You want to join a club that has a diverse membership, including investors, realtors, developers, etc.
The more diverse the club, the more likely you are to meet and build relationships with the right people there. Also, most real estate investment clubs will offer investment opportunities, much like REITs, but you can opt in or out of these properties depending on whether or not they suit your particular needs.
Learn as Much as You Can About the Markets You’re Investing In
Finally, do as much research as you possibly can on the markets and properties you’re investing in. In real estate investment, you can never know too much, but you don’t have to know it all when you make your first investment. A lot of seasoned investors begin their investment careers with REITs and then branch out to investment clubs, crowdfunding platforms, and direct purchases. The more you invest, the more you’ll learn, and the more you’ll grow your portfolio.