Real Estate Investing For Beginners: 3 Perfect Exit Strategies

Key Takeaways

  • When investing in real estate, it is crucial to create a business plan and marketing strategy.
  • Although getting your start in real estate can feel daunting, there are some exit strategies that are more friendly to beginner investors than others.
  • When choosing your investment strategy, make sure to consider your circumstances and the career goals that you defined.

When it comes to real estate investing for beginners, what are the best options?

The key to investing in real estate for beginners is understanding your options. The real estate market contains a plethora of investment opportunities for those willing to take the plunge. And while every investment has the potential to strike real estate gold, not every endeavor will be a match — especially for beginners.

Real Estate For Beginners 101

Getting started in real estate investing can seem like a daunting process. Investment vehicles like wholesaling and rehabbing, as well as property types likes single-family, multifamily and commercial, can seem foreign to novice investors. However, done right, investing in real estate can provide a wealth of benefits for those who diligently work their butt off and make smart investments. For those considering investing in real estate, there are a handful of beginner investment options ripe for you.

The first thing to consider when beginning to start a career in real estate is to recognize that real estate investment is a business. Unlike stocks and bonds, your business will be driven by your desire and motivation to achieve your goals. While you don’t need to know everything about real estate, it’s also important to begin the process with a niche and strategy in mind. Whether beginner or seasoned, young or old, the real estate market offers a myriad of investment options for investors, but you’ll need a plan in place to accomplish it. A real estate investing business plan for beginners and a real estate marketing strategy should be the first order of business when investing in real estate for beginners. These two components will not only highlight the goals an investor wants to obtain, including a roadmap to achieving them, but a way of also ensuring new deals continue to flow in.

Although every investment will have its own layer of risk and reward, there are a few starter investment options perfect for beginners. The following outlines three simple investment options that are perfect for beginner investors.


[ What’s the best investment strategy for YOU? Take “The 10-Minute Real Estate Investor Personality Test” and find out ]


real estate investing for beginners

Ways To Invest In Real Estate

Not all investing strategies are equal, as some are pointedly more friendly to beginner investors than others. As mentioned above, a beginner real estate investor would be wise to set out with a business plan, which should include a roadmap of how they will execute a specific investing strategy. It is important to note here that there is nothing wrong with starting out with an investing strategy that is more accessible to novices. On the contrary, choosing a relatively easier niche can be a smart way to learn the ropes of the industry, get to know your local market, and make connections with industry professionals before moving on to strategies that require higher stakes. The following are three exit strategies that beginner investors are encouraged to consider as their starting point:

  • Wholesaling: In wholesaling, the investor acts as a middle man by identifying and securing a property that is being sold for under market value, and assigning the contract to an end buyer.

  • Prehabbing: Prehabbing real estate is the process of purchasing and positioning a property for re-sale to investors, such as rehabbers, by enhancing the property’s appearance through minor cosmetic updates.

  • REIT Investing: According to Reit.com, a real estate investment trust (REIT) is a company that owns and manages income-producing properties, often in commercial real estate. Individuals can pool resources to facilitate the funding of these larger-scale real estate purchases, with the REIT serving as the executor.

1. Real Estate Wholesaling

One of the fastest ways to get started in real estate is the wholesale deal. This unique opportunity involves securing a property under market value and then assigning an end-buyer to purchase the contract. In most cases, an earnest deposit will be required, but the amount will generally differ with each deal.

The key to succeeding at a wholesale deal lies in the buyers list. A wholesale buyers list is essentially a pool of talent; an array of hungry investors looking for their next deal. You, on the other hand, are the middleman; the provider of deals these investors are looking for. And while not every lead will become a sale, the importance of having a vast collection of worthy candidates to fall back on is crucial when investing in real estate for beginners. Having a healthy buyers list will also help you from scrambling around to find a buyer once you’ve secured a contract. Even worse, it will almost always result in several costs and penalties.

Tips for building a wholesale buyers list include:

  • Gather information: Buyer’s first and last name, phone number, email address, type of funding, buying criteria, source of referral.

  • Develop a real estate lead generation campaign: In an effort to cultivate interest in your services, you should begin networking, marketing campaigns and social media, although the approach will vary from real estate entrepreneur.

Another component that may be tricky when investing in real estate for beginners is the wholesale contract. This portion of the wholesale deal will encompass two contracts: the purchase and sale agreement (the one you have with the seller), and then the Assignment of Real Estate Purchase and Sale Agreement (the contract between you and the new buyer).

2. Real Estate Prehabbing

Another great option when investing in real estate for beginners is a prehab. Unlike a rehab, which entails further investment of funds into the property in order to make upgrades and significant improvements, the prehab requires the bare minimum. Generally speaking, this will be comprised of enhancing the property just enough visually to entice investors, as the aim is to sell the sizzle, not the steak. Instead of making drastic changes to the property, prehabbing consist of making improvements through sweat equity, which will typically include:

  • Cleaning: Taking the time to remove trash and debris from a property, including general cleaning, can have a powerful impact on its appeal.

  • Painting: At minimal costs, painting provides an affordable way for beginners to improve the appearance of a property.

  • Landscaping: If you can’t get people to like the outside of the property, they most definitely won’t be interested in taking the time to come inside. Believe it or not, curb appeal goes a long way in real estate, at very little costs.

When investing in real estate for beginners, the allure of prehabbing is easy to see. Not only does it involve very little risk and minimal work in comparison to other investment options, but it will also produce a quick return on investment. The following highlights the top 10 reasons to get started prehabbing:

  • To flip houses faster
  • Faster returns enable more homes to be flipped each month and year
  • Monthly annual and lifetime income and returns
  • Maximizing return on investment
  • Maximizing return on property improvements
  • Selling properties for more money
  • Shortening time from acquisition to having a marketable product
  • Reducing cash needed for improvements
  • Lowering risk associated with tying up capital and gut rehabs
  • Minimizing management requirements

Although not every property is suited to be a prehab, this investment option is perfect for beginner investors looking to get their feet wet.

3. REIT Investing

Don’t let the name fool you; REITs can be a terrific option when investing in real estate for beginners. It may sound complex, but Real Estate Investment Trusts (REITs) are perfect for those looking to obtain passive income, as REITs have the capability to provide revenue streams, otherwise known as dividends, on a regularly basis.

In the same fashion one would invest in stock options, investors can invest in REITs, which are basically a company–or companies–that own or finance income producing real estate. They allow investors to earn all types of income, including long-term capital appreciation, as well as a lucrative option when diversifying one’s real estate portfolio. In addition, REITs are an excellent option for those looking to grow their retirement platform.

“Nothing, at least that I am aware of, carries more promise for long-term dividend yields at the moment than real estate trusts,” says Than Merrill, my colleague at FortuneBuilders and CT Homes.

Although many variables can influence the future of REITs, this investment option can offer solid returns with relatively low risk — perfect for beginner investors or those looking to prepare for retirement.

real estate investment for beginners

Which Beginner Real Estate Investing Strategy Will You Choose?

There is typically no wrong or right answer when selecting a beginner real estate investing strategy, and is more of a matter of aligning your individual goals and personal circumstances. For example, those who do not have immediate access to capital may not be able to pursue REIT investing immediately, but may find wholesaling to be a great place to start. On the contrary, those who wish to pursue real estate investing in a passive manner, and do not want to have to play an active role, might find that getting started in REIT investing is the perfect fit. Selecting the right exit strategy is a question of asking yourself if you feel that you are capable, if you have access to the correct resources, and if you will be able to find longevity through that specific niche.

Summary

Getting started investing in real estate as a beginner is often a matter of identifying the investment vehicles available to you. Although each endeavor will entail its own risk and reward, there are an assortment of investment options perfect for rookie investors. Along with low risk and money down, these investment choices can provide a wealth of opportunity, as well as a learning curve for those starting out.

Which real estate investing for beginners strategy do you think is the right for you, and why? Feel free to share in the comments below.

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Real Estate Investing Strategies
Real Estate Investing Strategies
Real Estate Investing Strategies
Real Estate Investing Strategies
Real Estate Investing Strategies