Getting Started
Understanding Your Goals
Before you open your wallet to invest in anything, address the following considerations:
What kind of returns are you looking for?
What is your timeline and liquidity requirements? Do you have large expenses or a large purchase coming up in the near future?
How hands on and how much control do you want in decision making?
How much work and time do you want to spend on your investments?
What is your risk tolerance?
How much capital do you have to invest? Do you have emergency funds?
What are the tax implications of the investment?
What would your money be doing otherwise?
Why Real Estate?
Real estate is a critical part of your investment portfolio because it:
Fulfills a basic need - people need places to live
Has intrinsic value - is not subject to as much volatility as the stock market
Achieves leverage by getting a loan for the majority of the purchase
Produces tax benefits to offset passive income
Generates cash flow to offset your personal expenses
Hedges against inflation as a hard asset
Check out our additional posts about the benefits of real estate from a taxation and asset perspective as they come online!
Different Types of Residential Real Estate
Savvy investors know that there's more to real estate than simply single family homes and apartment buildings (although that is our favored asset class).
See some of the options in the diagram to the left. Apartments or multifamily homes come in multiple types, and affordable housing is another major sector of the market, which can also vary, like senior living. Both affordable and senior living may require special permissions, processes and types of funding, which can make them difficult for beginning investors.
Mixed-use includes a residential as well as an office or retail component, which can also be tricky. Retail spaces can generally be leased on a triple-net (no / little operating cost to owner) basis, but office spaces are often built out by the owner, which can bear a high cost.