Real Estate Investing for Beginners: How to Start Investing in Real Estate in 2024

Real estate is one of the best investment vehicles for wealth creation, and there are many ways to get started. In this complete guide to real estate investing for beginners, you’ll learn about the different types of real estate investments, several ways to make money in real estate, the best strategies for newbies, and what you’ll need to become a successful investor!

In This Article:

What is Real Estate Investing

Types of Real Estate

The 5 Common Real Estate Investments 

Ways to Make Money in Real Estate 

The Best Ways to Invest in Real Estate as a Beginner

Best Real Estate Career Paths

4 Key Traits of a Successful Real Estate Investor

Best Real Estate Investing Books for Beginners 

Best Real Estate Investing Podcasts for Beginners

6 Tips for Real Estate Investing Beginners 

Real Estate Investing for Beginners FAQs

What Is Real Estate Investing?

Real estate investing is when an investor buys, sells, markets, or lends on a property with the goal of making a return. This can either be through owning the property as a rental property, fixing it up and flipping it, wholesaling it to another investor, or lending money to investors.

Real estate offers both active and passive investing opportunities. Depending on your strategy and goals, you can take a hands-on approach by managing or renovating a property or a hands-off approach by purchasing real estate investment trusts.

Types of Real Estate

Real estate is a large and diverse industry with different categories of assets. You should be familiar with the four main types of real estate and how they are zoned:

Residential

Residential real estate refers to any property or land that is zoned for housing. This includes all types of single-family and (small) multifamily homes:

• Single-family homes
• Duplexes
• Triplexes
• Quadplexes
• Condominiums
• Townhouses

Commercial

Commercial real estate refers to any property or land that is zoned for business use. This includes most non-residential properties and also large apartment buildings.

• Warehouses
• Apartment buildings 
• Office buildings
• Retail buildings
• Self-storage facilities
• Hotels

Mixed-Use

Mixed-use real estate can be used for both residential and commercial purposes. These properties are common in metro or downtown areas, where high-rise buildings are split between apartments and either office or retail space.

• Residential and office
• Residential and retail

Land

A plot of land is a natural, defined area that can be bought, sold, and developed. It consists of not only the ground’s surface but also any resources or structures that fall within its borders, as well as any space below or above ground.

Looking for your first investment property? Schedule a free consultation with our investing experts!

The 5 Common Real Estate Investments

While there are many ways to get into real estate, most investors adopt one of the following strategies:

1. Rental Properties

Rental property investing is the process of purchasing an investment property and renting it out. These properties range from single-family homes and apartment buildings to office spaces and vacation rentals.

Pros

Rental property investing allows you to make money in several ways. You can create cash flow through rental income, equity through appreciation, and huge savings through tax advantages.

Cons

To buy a rental property, you’ll most likely need to come up with a down payment. You’ll also be responsible for maintaining your property and dealing with tenants.

Don’t want to deal with tenants or costly repairs? Rent to Retirement handles all the management and maintenance for you with their turnkey real estate investments!

2. Flipping Houses

Flipping a house is the process of buying a distressed or discounted property, fixing it up, and selling it for a profit. House flippers are typically hands-on investors who are adept at managing rehab projects.

Pros

Selling a rehabbed property may result in a big payday, which may come within a few months of purchasing the property. Because you don’t hold the property, you also aren’t responsible for landlord duties.

Cons

Flipping houses is a risky strategy since you can easily miscalculate rehab costs or get caught holding a property for too long. You are also required to pay taxes on short-term capital gains.

3. Wholesaling

Wholesaling is the process of finding a property, getting it under contract (ideally, below market value), and then assigning the rights to a seller for a higher price. The wholesaler acts as a middleman between the seller and buyer and is not required to put up the capital for the deal.

Pros

Wholesaling involves very little risk, as you aren’t taking on the debt or the property in the deal. You also need very little money to get started, and you receive your profits shortly after the property is sold.

Cons

Due to the low-risk nature of wholesaling, competition is fierce. Wholesalers are paid when the property sells, but they don’t benefit from the monthly cash flow, appreciation, or tax advantages of other investments.

4. Private Lending

Private lending is the process of loaning capital to an investor as an alternative to traditional bank financing. Private money loans are often shorter than 15 or 30-year mortgages and typically span from a few months to five years. The lender and investor create and agree to the terms of the loan.

Pros

Private lending is one of the most passive ways to get into real estate. You’ll collect interest payments each month and may be able to demand higher returns when market interest rates are high.

Cons

This strategy has a high barrier to entry due to the sheer amount of capital that is required. There are also few protections for your money, so you must do your due diligence on both the borrower and the property.

5. REITs (Real Estate Investment Trusts)

If you want to benefit from the real estate market without the responsibility of owning and managing property, you can invest in REITs instead. These companies sell shares of their real estate portfolios and pay investors dividends as they profit.

Pros

REITs allow you to earn passive income from anywhere in the world. You can buy shares with very little money, and when properties appreciate, you share in the profits.

Cons

Since profits are shared among many shareholders, returns are much smaller than rental property returns. Additionally, you don’t own any of the properties and therefore have no control over the investments.

Ways to Make Money in Real Estate

In real estate, there are several avenues to making money. Some income streams are immediate, while others are realized down the road.

Appreciation

Home prices tend to increase over time, and owning property means you receive the gains when it comes time to sell. Let the market do its thing, or force appreciation by making home improvements or increasing its square footage.

Cash Flow

Cash flow is the amount of money left over after accounting for monthly expenses, debt service payments, and capital expenditures. Positive cash flow means you’re earning a profit that you can choose to keep or reinvest.

Tax Benefits

Owning property allows you to deduct expenses like property taxes, mortgage insurance, loan interest, depreciation from wear and tear, and qualifying business expenses. Additionally, long-term capital gains are taxed at a lower rate than normal income.

Loan Paydown

Every time you make a mortgage payment, you are building the equity in your home. Renting your property out to tenants and collecting rent from them each month means that they are effectively paying down your loan for you!

The Best Ways to Invest in Real Estate as a Beginner

While there are many ways to invest in real estate, some are easier than others. Here are two of the most newbie-friendly strategies!

Turnkey Rentals

The term turnkey is used to describe a fully renovated property that is tenant-ready on day one. Turnkey rentals are some of the best investment properties for beginners, as they require very little maintenance or repairs during the first few years of ownership. Some turnkey real estate companies also offer property management services, giving you an even more passive investing option.

Rent to Retirement has turnkey rental properties available across the nation and can handle all of your property management needs. Find your next investment property today!

House Hacking

House hacking is an investing strategy that allows you to earn money from the home you’re already living in. By sharing your property with renters, you can collect a consistent rent check to help cover your monthly mortgage payment. Through this strategy, many investors generate enough rental income to cover their entire housing expense.

What’s more, you don’t need a large property to house hack. Buy a simple duplex and rent out one of the units or rent out rooms in your single-family home!

Best Real Estate Career Paths

Looking for opportunities beyond investing? If you want to work in real estate and get paid to learn more about the industry, consider one of these careers:

Real Estate Agent

A real estate agent, or realtor, is a licensed professional who helps people buy and sell properties. When a property is bought or sold, they earn a commission, typically 2.5-6% of the sale price. Agents are responsible for knowing their market, making properties look appealing to potential buyers, negotiating with other parties, and handling transaction documents.

Property Manager

A property manager oversees a property’s day-to-day operations on behalf of the owner. They typically earn a fixed property management fee or a percentage of the monthly rent. Their responsibilities may include screening and placing tenants, maintaining the property, collecting deposits and rents, communicating with tenants and owners, and ensuring compliance with local landlord-tenant laws.

Mortgage Broker

A mortgage broker is the middleman between borrowers and lenders. They earn a commission, also known as an origination fee, once mortgage funds are distributed. Brokers are responsible for gathering the borrower’s financial information and passing it on to potential lenders, identifying the best type of loan for the borrower, and communicating with both parties throughout the process.

4 Key Traits of a Successful Real Estate Investor

Real estate investing requires a certain temperament and skill set, but fortunately, you can learn these traits. Successful investors exhibit the following:

1. Financially Disciplined

Investors have a healthy relationship with risk. When working with large assets and debts, you need to carefully track the money that goes in and out of your business and be willing to pivot when things aren’t going well.

2. Lifelong Learners

You don’t need a college degree or mastermind to invest in real estate, but a thirst for knowledge will take you a long way. Did you know Rent to Retirement has investing education specifically for new investors? Join Rent to Retirement Academy today!

3. Team Oriented

As a real estate investor, you’ll likely be working with brokers, agents, sellers, property managers, contractors, and other investors at some point. Not to mention, many of these people will be depending on you. Make sure you’re prepared to work with different personality types.

4. Driven

Some investors commit thousands of hours to learning, networking, and analyzing before finally landing their first deal. Without a consistent paycheck or reward for effort, you need to be extremely self-motivated.

Best Real Estate Investing Books for Beginners

Investors are constantly reading, learning, and using their newfound knowledge to make better decisions. Here are some of the best books about investing in real estate for beginners:

• The Book on Rental Property Investing

• Retire Rich with Rentals

• How to Invest in Real Estate: The Ultimate Beginner's Guide to Getting Started

• The Book on Managing Rental Properties

• Long-Distance Real Estate Investing

Best Real Estate Investing Podcasts for Beginners

Listening to podcasts is one of the simplest and most passive ways to learn about real estate, and there are all kinds of helpful resources to help you get started. Tune in to any of the following podcasts while you’re commuting to work or tidying up the house:

• The Rent to Retirement Podcast 

• BiggerPockets Podcast

• Real Estate Rookie Podcast

• The Real Wealth Show

• Best Real Estate Investing Advice Ever

6 Tips for Real Estate Investing Beginners

Ready to go from observer to investor? Here are some crucial tips to help you get started.

1. Get Your Finances in Check

The better your financial position, the easier it will be to afford the type of property you want, get approved for a mortgage, and secure the lowest possible interest rate. Saving money and improving your credit makes you more bankable!

2. Talk to a Landlord

Landlording isn’t for everyone. Before you invest, speak with a landlord about their experience and what you should expect. Don’t know a landlord? Attend a local meetup or schedule a call with the Rent to Retirement team!

3. Know Your Goals

Some investors want the comfort of a little cash flow each month, while others dream of replacing their W2 income and leaving their nine-to-five jobs. Know your long-term investing goals so that you can build a portfolio that supports them.

4. Start Looking Into Investing Markets

Where you invest will either help or hurt your chances of buying a property and making a profit. Check out our list of best places to invest in real estate or start browsing turnkey rental properties for sale in some of the nation’s top investing markets!

5. Understand the Key Metrics

Investors rely on several key metrics to analyze markets and properties. Check out our articles on cap rates, gross rent multiplier, cash flow, net operating income (NOI), and cash-on-cash return to become familiar with these crucial terms!

6. Talk to a Lender

Next, connect with a lender and get a mortgage preapproval as soon as possible, especially if you expect to shop for properties in the next six months. Knowing how much home you can afford will help you narrow down your options.

Ready to Invest?

Now that you know what it takes to invest in real estate and build a profitable portfolio, it’s time to take action. Schedule a call with Rent to Retirement today to find your first investment property!

Real Estate Investing for Beginners FAQs

What Is the Best Entry-Level Investment for Real Estate?

Turnkey rentals and house hacking are two of the best investments for beginners. These strategies are relatively low-risk, and these types of properties are much easier to manage than traditional rentals and house flips.

How Can a Newbie Start Investing in Real Estate?

Where you start will depend on the money you have available to invest, your goals, and how much risk you’re willing to take on. Many beginners start with turnkey rentals or house hacking, as they are less risky than other strategies.

Is $5,000 Enough to Invest in Real Estate?

There are several ways to invest $5,000 in real estate. If you don’t have enough money to cover the down payment for a rental property, find a partner who can bring the capital for the deal. You can also buy real estate investment trusts (REITs).