How to start investing in Real Estate

Blog March 2024

If you’re confused as to how, when and where to invest first; Real Estate is  considered to be a great way to passively build up your assets exponentially (depends if you’re doing it right). It’s a great way to diversify your portfolio and it’s pretty simple to get started.

There are a number of ways to approach investments. However, if you’re fairly new to the entire game, you might be finding it awfully difficult to find where to start. That’s where we come in.

Before we get started on how to start investing into real estate, it’s better we understand the ‘why’ first.

Why Real Estate investment?

If you’ve got businesses set up, invested in virtual currencies, got stocks, then you might’ve started eyeing real estate. However, the entire idea isn’t as oversimplified as purchasing and selling.

The real estate market provides investors with different possibilities that can give them leverage and increase their returns on the basis of borrowed funds.

So, what exactly are we talking about here? Well, just to get you started, we’ll start off with an example. If you happen to buy a property and put down a down payment on it, that further proceeds down into monthly payments; chances are that at some point the property value will far exceed its initial value. Thus, providing you with a more than 100% return on your investment.

This is a huge oversimplification, there are obviously other variables at play such as maintenance, the years you’ve owned the property and unfavorable market fluctuations due to unforeseen conditions.

People usually prefer to avoid any sort of liquid money lying around due to devaluation. Which is why many would turn to investing in property, stocks or virtual currency for an increased return in a long-term scenario.

Other than that, you can easily go out of your way to rent out properties and earn a monthly income. It’s consistent money, and not only are you making money through rental, but the value of your property keeps climbing over the years you own it.

How to invest in Real Estate

Below, we’ve taken the liberty to list down a few methods that you can utilize for real estate investment in the US, and generally anywhere in the world. 

These are the best ways to start investing:

Real Estate Investment Trusts (REITs)

Probably the beginner’s way to go is a REIT. This allows you to invest into real estate without actually getting entangled with the various problems that accompany having a physical property.

REITs usually own various properties that can either be residential or commercial. This is a long-term investment and at the end of the day, you get paid high dividends. It’s a pretty good option to put your chips into if you’re looking to add more money to your retirement days. Heck, you can continue to reinvest that money into your REIT for as long as you want.

There are however a few risks depending on what type of REIT you’re going for. This means that if you’re going for non-traded REITs, they are seldom sold easily whereas going for publicly traded REITs is a much safer option which you can purchase through brokerage firms.

Online Real Estate investment platforms

There are real estate investment platforms that help out individuals in buying out property through financing (debt or equity). These platforms will connect borrowers to investors.

Borrowers will essentially get their projects financed thanks to the investors who will be paying them through timely payment disbursements. Remember however, these methods don’t allow you to immediately liquidate your cash the same way stock does.

There are however generally a few prerequisites that you will need to account for if you want to be trusted in these specific circles. Most of them require you to have a specific amount of net-worth and/or a figure earned within the past 2 years that make you viable for finances similar to these.

Rental properties

It’s a widely followed methodology to buy out properties on mortgages, and rent out any unused part of your newly bought space and generate extra income to pay off the monthly payments. If you already have a place to stay, then you can significantly increase your monthly income to pay off your mortgage by renting out the entire place!

Effectively, you’ll be paying off your mortgage through rent, and with time you’ll have a property you can sell for a considerable return on your investment.

Flipping properties

There’s a lot of money to be made by flipping properties. You could go about buying land and building something on it. Depending on how well you build and decorate it, chances are you’ll end up making a considerable amount of money on it.

This also applies to buying out old homes and renovating them to look as if they were entirely new. You will have to, however, keep an accurate track of how much repairs are going to cost to get a good idea of how much profit you’ll be making in the short-run.

It’s an extensive process, but once you’ve built momentum and can hire out a few people to eye out potential projects, give you accurate estimates on renovation and a good plan that details out your return-on-investment opportunity, you can really start to make a lot of money every few months or so.

Where to invest in Real Estate in the US?

The last few years have opened up several opportunities for investment in Real Estate in the US. Investors have been benefitting all around  the United States thanks to the market having grown so well; with homeowners seeing a drastic change in prices of homes (Upto almost 10%!).

A lot of this has to directly do with the mortgage rates decreasing, which consequently increased demand. With individuals entering their home buying years, and freelancers more common than ever, the demand increased by multiple folds in the past few years.

Reasons to invest in Sacramento

You might have often let Sacramento go unnoticed and under your radar, but this might be time to take the place into account considering its beneficial real estate trends that have certainly captured our attention!

Sacramento’s actually much easier to get into compared to other places in California. The minimal amount required for an investment in Sacramento is around $350,000.

Not only are the houses relatively cheaper, but the capital offers a relatively better quality of life, with a quieter and much more relaxing environment compared to its counterparts. Let’s not forget the most important factor that persuades investors to come to the capital; affordable living.

That’s right, the cost of living in Sacramento is considerably lower, a whopping  65% lower than San Francisco’s!

Just like Raleigh, Durham and many other cities in the United States, Sacramento too is experiencing a growth in its economy as a lot of opportunities open up to teens. 

Not to mention that freelancing has rapidly picked up pace, and a lot of people have started to work from home which has brought them inevitably closer to buying houses consequently building up a lot of potential house buyers. This has increased demand for housing a considerable amount in Sacramento.

While you wait for your property to increase in prices, you can easily rent out your house in Sacramento for as much as $2,000 per month.

Reasons to invest in Miami

Miami is a dreamy location filled with colors, delicious food and amazing weather. Not to mention it’s a hot spot for tourists all around. The vibrance of Miami adds great value to its real estate market.

Over the years, our clients cannot deny the profitability that they’ve gotten by investing into Miami. The market analysis for Miami’s Real Estate reveals a consistent appreciation over the past 10 years, with values rising by +4% in just the previous 5 years. 

After the pandemic, the market increased massively as people who were working from home decided to move to the beautiful city, and the migration gave rise to demand which in turn made way for positive growth for all real estate investors. 

People all over America, who have been able to surf the Covid wave financially, typically your hedge funds, or wallstreet boys have been moving to Miami because they love the weather, and of course the tax reforms that would so graciously save them from high tax cuts in a place like New York.

When you look at Miami and compare that with other real estate options, Miami just seems to be an ideal choice thanks to a relatively cheaper cost of living and the beauty that surrounds it.

Reasons to invest in Detroit

Detroit’s market seems to be well within the affordable range for a lot of people at this point. And buying out property currently is a wide decision that is actually being followed by many of our clients due to the potential for high returns in the future.

The city currently offers its investors an opportunity for double-digit returns; and this implies both for flipping houses as we mentioned above, as well as rentals. However, this strongly depends on the neighborhood you’re going for. But, you don’t need to worry too much about WHERE to go in Detroit because our extensive research is yours to employ at GCG Real Estate.

Potentially there are a number of problems with property management, tenants, and even a short supply of a good workforce, but with what seems to be transpiring there definitely is a positive change. Detroit’s Real Estate revolves around a high-risk and high-reward mentality.

There are some interesting things to look out for like Microsoft and Google opening local offices, and other brands beginning to make their mark. Unemployment has dropped to almost 4%. 

New jobs are opening up all around. The current situation in Detroit is certainly opportunistic and investors should look into flipping properties and buying their way into Detroit for an investment that could give them a great deal of profit.

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Any questions

What is affordable housing?

Affordable housing refers to housing units designed to be accessible to low- and moderate-income families, typically costing no more than 30% of their gross income.

The definition of “affordable” typically varies depending on location and income levels but generally encompasses rent or purchase prices that don’t exceed a certain percentage of a household’s income.

What is Section 8 housing in the US?

Section 8 is a federal rental assistance program in the US run by the Department of Housing and Urban Development (HUD) that helps low-income families and individuals afford decent and safe housing in the private market. 

The program provides eligible households housing choice vouchers that cover a portion of the rent directly to the landlord, with the tenant paying the remaining amount. Property owners who participate in Section 8 agree to rent units to qualified individuals and families at a rate approved by the program.

How can I invest in Section 8 housing?

There are several ways to invest in Section 8 housing:

  1. Direct ownership: You can purchase a property approved for Section 8 and rent it to a qualified tenant using a voucher and receive rent subsidized by the government.
  2. Real estate investment trusts (REITs): REITs pool investor funds to purchase and manage income-producing real estate, including affordable housing.
  3. Limited partnerships: Limited Liability Companies (LLCs) offer another option for investors to pool resources and invest in affordable housing projects.
What is the difference between multi-family and single-family properties?

Single-family property: This refers to a standalone house or unit designed for and rented to one household.

Multi-family property: This refers to a property containing multiple dwelling units, such as a duplex, apartment building, or condominium complex. Multi-family properties offer the potential for higher rental income but typically require different management strategies and considerations compared to single-family homes.

What is the difference between buying and flipping houses?

Buying and holding: This involves purchasing a property to keep it as a long-term investment, generating rental income and potentially appreciating in value over time.

Flipping: This involves buying a property, renovating it to increase its value, and then selling it quickly for a profit. This is a more hands-on strategy with higher risks and rewards compared to buying and holding.

How much do I need to start investing in affordable housing real estate?

The minimum investment required varies depending on the chosen method. Direct ownership typically requires a higher initial investment for the property purchase, and renovation up to Section 8 standards, while other options like REITs might have lower minimum investment amounts.

Do I need to be a US citizen to invest and own the property?

No, US citizenship is not a mandatory requirement for investing in affordable housing in the US. However, specific restrictions or regulations might apply depending on the investment method and your residency status.

It’s crucial to consult with a professional to understand the legal and tax implications for non-citizens.

Do I need to pay US tax as an overseas investor?

This depends on the type of investment, your residency status, and any applicable tax treaties between your home country and the US.

Consulting with a tax professional specializing in international investments is highly recommended.