How To Get Started On Property Investment

16th August 2022

For those looking for an extra source of income and a little risk, investing is a hot topic. Bitcoin and trading shares can be excellent for long or short-term gain as long as you’re happy with the hands-off approach. However, this can be difficult for some people to grasp. A more hands-on and tangible way of investing is in property.

There’s no denying it, property is a massive source of income for those that know how to invest in it successfully. Property prices, for both rental and for sale residences, seem to be on a never-ending increase, with 2022 seeing prices reach an all-time high here in the UK. People always need somewhere to live, which means that value will tend to hold steady as long as a property is well-maintained. 

But knowing what you’re doing when investing in real estate can require experience and practice, things that newcomers won’t have. Property investment can be a steep learning curve. Here is a quick guide for beginners on how to get started.

Why Real Estate?

The first step in real estate investing for beginners is to understand the benefits of this type of business. Historically and at present, real estate has been and remains a smart investment. It’s a good way to spread your eggs in different baskets, so to speak, in case the ever-changing economy alters against your favour in other fields.

Another benefit is the flexibility involved in property. When you own real estate, you are free to chop and change it however you choose. Sell it, improve it, repurpose it, rent it, and much more to make your property work for you and your investment. 

Furthermore, property investment is a very tangible way to make money. Rather than the risk of the stock exchange and logging on to find changes that have happened overnight, real estate is somewhat more reliable. You can physically see where your money has gone, where you can improve, and the changes that need to be made. 

Woman receiving the keys to property investment.

Types of Property Investment

If you are new to the world of real estate, you may be thinking that you’ll need to purchase a block of flats right now to stand a chance of making a return. In reality, there are far more opportunities in the property market than one might think. While you can begin by spending a large chunk of money right away, there are less daunting ways to invest in property for beginners.

Real estate investment trusts (REITs)

You may not feel that you are in a position to begin purchasing whole properties. A popular way to enter the investment market is buying REITs. A REIT stands for real estate investment trust, which is when several investors can pool their money under one trust or corporation. These funds then go on to sell, buy, or maintain properties that generate their own income. REITs are normally traded on major exchange sites just like stocks, so this is a more hands-off approach than becoming a landlord yourself.

For a REIT to be qualified as such, 90% of the taxable profits received by the corporation must be paid out to shareholders in the form of dividends. REITs can invest in a huge variety of property types, from office buildings to healthcare facilities, and mortgages to shopping centres. 

Real Estate Investment Groups

Real estate investment groups (REIGs) are another way to invest in property without becoming a landlord and inheriting the responsibilities that come with the role. These groups function like a mutual fund for a rental property - usually flat blocks are purchased by a company and then investors are invited to buy them through the original purchasing company, joining a real estate investment group when they do.

You may purchase one unit or even several units of living space (flats) and own them while undertaking none of the maintenance, administration, or advertisement. This is all managed by the mitigating company, who will then take a percentage of the paid rent for their efforts. The specifics and quality of an investment group will depend entirely upon the initial purchasing property. 

A row of colourful terraced houses for sale or rent.

Real Estate Mutual Funds

Mutual funds are a great way to gain a lot of exposure to different types of real estate while only investing a small amount of capital. These funds invest typically in REITs or real estate operating companies. These can have a huge variety of goals and strategies, meaning their asset selections can vary too. Real estate mutual funds provide investors with research about the viability and performance of different specific real estate investments. 

Owning Rental Property

For a more hands-on investment opportunity, you can always follow the traditional method of purchasing a property and renting it out. Warehouses, detached houses, business properties and more are all on the market to be purchased and rented to tenants. Whether you appoint yourself as the landlord or landlady or choose to outsource the management aspect, this is your choice. It’s also possible to live in a unit of the property while renting out the other units.

With rental property, you’ll benefit from the flexibility that comes with it, repurposing your property depending on the property market. Your cash flow, assuming your tenants pay monthly, will be regular and reliable, though you might have to roll your sleeves up when it comes to maintaining the units and finding tenants. This method also assumes a certain level of risk that you should be prepared for.

Property Flipping

This is an entirely temporary endeavour, not a long-term management scheme. It’s as simple as buying a property, redecorating the rooms and fixing it up, and then selling it at a profit. Flipping a property can be a lot of fun, putting your own creative spin on the place. You can flip house after house if you want to, or simply embark on a short-term house flip plan. As long as you continue to market properties at a higher price, nothing can slow you down.

When carrying out home improvements to your purchased property, consider self storage with Make Space. Our convenient locations and flexible rates mean personal storage is the perfect way to protect furniture while you set above improving your investment.