We’ve said before that if your money sits in a savings account, you’re losing money. While a savings account is a low-risk way to enhance your cash flow, it doesn’t provide the same opportunities as real estate. Plus, your savings account isn’t quite the equivalent of a retirement plan. That’s why so many individuals consider commercial investment properties.
Finding the right investment property is critical to your success, especially if you’re trying to learn how to make money in real estate. After all, before you can build a real estate investment portfolio, you need to find good investments and make sound financial decisions to empower your investing journey, improve your cash flow, and build equity.
Particularly if this is your first time pursuing a real estate investing opportunity, finding a property can feel overwhelming. Learning about stock market options, down payment terms, asset classes, commercial real estate, and tenants’ rights takes time, energy, and resources. That’s why it’s crucial that you have the right long-term resources, and you know where to look. So, if you’re wondering how to make money in real estate and find your first investment property, here’s what you need to know.
Choose a property type.
When looking for commercial property, you’ll want to consider the primary types of property available to real estate investors. These include multifamily housing units, office buildings, industrial spaces, retail real estate projects, and hospitality real estate. During this time, you should do your due diligence to learn more about asset classes, diversification, and key property concepts that could impact your investment strategy.
As you’re deciding between your property types, it’s essential that you consider the purchase price, lease, potential return, utility expenses, and current market volatility. By taking a closer look at each property type, you can leverage your knowledge to negotiate the set price with the seller. Of course, all of this can impact your cash flow after you’re done working with the seller, so you must find the property type that works for your individual investment strategy.
In recent years, many individual investors have chosen to take the time to explore different asset classes, wholesale options, foreclosures, and crowdfunding brands to find the right asset types. If necessary, you might want to discuss a good choice to meet with a financial advisor, accredited investor, or financial management company. Investing services can also help you find the right applications, crowdfunding platforms, individual stocks, and money market accounts that align with the type of property that attracts you as an investor.
Ask for commercial real estate referrals.
When you’re looking for real estate, sometimes the best way is to ask. Whether you’re asking buyers, landlords, tenants, or Airbnb hosts, a simple question is fairly effective out of all the different ways you can go about finding a piece of real estate. Compared to other types of investments, word of mouth can be the best way for a real estate beginner to find their first property.
If you’re going to ask for a few real estate referrals, you should narrow down the type of real estate property you require. Specify between residential property, commercial property, single-family homes, and other real estate property types. Whether it’s a vacation rental or you’re going to rent out your own home for a higher return in the short term so you can invest in a commercial property, you’ll find the best investment by clearly defining your preferred property types.
It’s also effective to take the time to weigh interest rates, leases, mortgage payments, and property taxes when you’re meeting with a real estate broker or agent. That way, you’ll be more prepared to have an open and frank conversation about initial investment amounts, stock options, and bank products that can help facilitate your commercial investment goals.
Consider passive investing tools.
If a more traditional form of investing seems too involved, your best bet might be to work with the great companies that connect real estate investors with passive investing tools and real estate syndications. This is a common way for many beginner investors to address high-demand commercial investing situations. With this kind of investing, you don’t have to manage homeowners, long-term tenants, travelers, or your own property.
Instead, many investors generate a healthy average return by putting enough money into real estate syndications and group investments. These passive investing tools can help investors generate a lot of cash without the hassle of being a landlord. In addition, passive investing partnerships make it easier for busy investors to take advantage of commercial investments in various ways. These include equity, appreciation, cash flow, and various tax benefits.
Real estate syndication offers similar options as crowdfunding for commercial properties like self-storage facilities and mobile home parks. These syndications are less involved than trying to manage stock options and sell shares, plus you have the peace of mind knowing a seasoned fund manager or specialist is helping you improve your cash return.
Work with a real estate agent.
When looking for real estate or commercial space, it’s often most intuitive to go directly to someone in the industry. Thanks to real estate advertisers, you’re probably already aware of local real estate agents and businesses. Working with a real estate professional, broker, or agency can help you vet risky investments, find the right properties, and refine your investment strategy. Whether you’re purchasing an office building, an apartment complex, a short-term rental building, or a second home, the right real estate agent can save you time, effort, and no small amount of money.
Many agents can help you find the best investments, from commercial real estate to residential real estate and other types of properties. A real estate agent makes it easier to negotiate with sellers, vet great investment opportunities, flip properties, and generate equity.
However, before you trust anyone with your investment strategy, you also have to vet your agent. Otherwise, you run a higher risk of making a bad investment or negatively impacting your rate of return. To keep your strategy in a good place and make the best investment decisions, work with a real estate agent with previous investment property experience. Sometimes, it’s a good idea to work with individual companies or real estate developers to help you make a safe investment with little money down. While these may not be high-return investments, sometimes starting small is a good thing. After all, managing a renter in a condo is a lot different than maintaining malls, trailer parks, or commercial buildings.
Contact a real estate investment trust (REIT).
For many buyers, investors, and prospective landlords, a great way to start working with real estate is with REITs. REITs are U.S. companies that own or finance income-generating real estate. Like many types of investments, REITs trade on major stock market exchanges and offer several key benefits to prospective real estate investors, property managers, and rental property owners.
REITs enable investors to put a given amount of money into different mutual funds, ETFs, and individual company stocks. As a result, these stockholders can generate positive cash flow and even make a lot of money without having to play their local real estate market, invest in renovations, or manage a rental property.
For beginners trying to navigate real estate property and passive income essentials, REITs regularly deliver solid returns. One downside new investors should consider, however, is that many REITs have weak growth potential. While a real estate investment trust is a welcome addition to most investment portfolio setups, they don’t always facilitate real estate growth or appreciation. Beginners who want growth alongside their dividends should consider private REIT options and weigh their risk tolerance when deciding.
Use real estate websites.
When looking for commercial opportunities to generate rental income, most beginner investors turn to real estate websites. It’s a good choice if you’re running up against market scarcity or you’re trying to view trends over a specific time or period of time. Websites offer a low-risk way to start finding properties, connecting with tenants or homeowners, and contacting realtors for commercial property newbies.
If you’re going to use a website to find real estate assets across the United States, you’ll want to look for platforms that can steer beginner investors to the best investment opportunities available. It would help if you also considered sites that allow you to refine your criteria beyond the basics, like how much money you’re able to spend. These tools can empower your long-term investing strategy when you’re looking for physical real estate and commercial deals. For property investors looking for a big return on their commercial opportunities, these refinements can mean the difference between steady income and sporadic additional income.
About the Author:
Annie Dickerson and her partner Julie Lam are founders of Goodegg Investments — an award-winning real estate private equity firm — and creators of the Real Estate Accelerator Mentorship Program. They are authors of the book Investing For Good and hosts of the popular Life & Money Show podcast: https://goodegginvestments.com/
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.