How to Start Real Estate Investing (Beginner’s Guide)

Saving money on start real estate investing does not have to be complicated. We rounded up the essentials so you can spend less and skip the guesswork.

Key Takeaways

• How to Start Real Estate Investing (Beginner’s Guide) Real estate investing can be a great way to build passive income, achieve financial in...
• Here are the steps you need to go from complete beginner to purchasing your first investment property.
• Written by Jen Smith Last Updated: April 29, 2024 Reviewed by Zina Kumok Home Investing Some of the links on DollarSprout point to products...

How to Start Real Estate Investing (Beginner’s Guide)

Real estate investing can be a excellent way to build passive income, achieve financial independence, or just bring in some extra income every month. Here are the steps you need to go from complete beginner to purchasing your first investment property.

Written by Jen Smith Last Updated: April 29, 2024 Reviewed by Zina Kumok

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Everyone wants a passive way to make money.

Some people start a dropshipping business, others create a blog. But numerous opt for a classic revenue stream: real estate investing.

If you want to know how to start investing in real estate, you’re not alone. There are over 22 million rental properties in the U.S. Over 16 million of those are owned by individual real estate investors, and the need for rental properties is predicted to keep rising.[1] [2]

But should you get into real estate investing? There are a lot of questions to answer before you make that decision.

Is Real Estate a Good Investment?

Real estate has traditionally been thought of as a good investment. Median U.S. home values are up 3.8% since 2018 compared to general inflation’s 2.3% increase.[3] [4] Real estate is also a “hedge” against inflation. You can increase rent prices every year while your mortgage stays the same.

For every advocate of real estate is a vocal critic who says it’s not worth the hassle and that you can get better returns elsewhere.

Ultimately, real estate is a good investment for people who enjoy it. If you love learning, treasure hunting for deals, analyzing properties, and working with a team of people, real estate might be a excellent investment strategy for you.

Pros Cons Real estate appreciates over time Some (not all) real estate investments require a large sum to get started Unique tax benefits Tax benefits don’t always apply (Semi) passive income Tenants and markets can be unpredictable More control over investment asset Requires lots of studying

Even if you enjoy real estate, it may not be a good investment for you right now. If you’re not financially stable enough to afford a down payment, closing costs, and basic repairs in addition to your personal living expenses, you should wait.

There are plenty of investment options to grow wealth. Real estate is just one of them. If you’re at a place where you’re investing for retirement and you want to take your wealth-building to the next level then it’s worth learning how to start investing in real estate.

A Guide to Real Estate Investing for Beginners

It may take a lot of planning and studying, but if you follow certain steps, you can overcome the learning curve and start building your real estate portfolio.

Step 1: Start learning (and don’t stop)

Before you get on Zillow and start browsing foreclosures, know what to look for from other experienced investors. Mistakes in real estate can cost you tens of thousands of dollars or more.

You can avoid some of those losses by gleaning the wisdom of those who’ve gone before you. Read books on real estate investing, listen to podcasts, find a mentor, and start networking with other investors in your area.

 

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Step 2: Set a goal

Figure out what you want from real estate. Are you looking to earn extra money while keeping your full-time job? Do you want to make enough to retire early? Or do you want to build a business that employs people?

Write down long-term and short-term goals that you can control. Getting clear on your business and income goals will help you choose the right real estate investment strategy and keep you from making deals that could tie up too much of your time or money.

Step 3: Choose a real estate investing strategy

Single-family homes aren’t the only way for individual investors to get into real estate investing. Based on your income and time goals, choose a strategy that’s right for you.

Crowdfunding

Real estate crowdfunding is the most passive way to invest in real estate and a excellent way to start if you don’t have a lot of capital. Instead of asking one investor to lend a lot of money, crowdfunding allows large developers to raise capital through lots of smaller individual investments.

Companies like Fundrise and EquityMultiple allow individual investors to get started investing in real estate with as little as $500.

*This is an endorsement made in partnership with Fundrise. While we do earn a commission from partner links on DollarSprout, our opinions and judgments are our own. 

Related: Fundrise Review 2025: Features, Expected Returns, and FAQs

House hacking

House hacking is where you live in the property while renting out parts of it, essentially living for free or very little. Because you’re occupying the property you don’t need to put a 20% down payment on it, so it’s easier to get started.

There are several ways to house hack, including renting out rooms in your house, buying a multifamily property and renting the other units, or renting space or rooms on Airbnb.

Flipping

House flipping is a fast-paced strategy. Investors purchase a property at a discounted cost, fix it up, and sell it as quickly as possible. While it can be a good way to make a profit, you need more money up front to be successful.

Wholesaling

With this method, an individual or wholesaler finds a deal and puts a contract on the property with the seller. They then find a buyer for the property, typically another real estate investor, and assign the contract to the buyer for a higher cost.

The buyer pays the wholesaler and the wholesaler pays the seller, keeping the difference. This is kind of like a finder’s fee.

There are no renovations, additions, or even money invested in the property. The profit is lower, but the opportunity is high if you’re good at finding deals. It requires a lot of patience, research, and building a network of investors who want deals.

Purchase & hold: Single-Family

In this strategy, the investor buys a single-family property, rents it out, and holds on to it for a long time. You can fix it up with less expensive features than if you’re flipping, but you won’t get a large cash return as quickly.

Numerous people get into this strategy of real estate investing by renting out their primary residence after they move. If you’re not ready to invest now but know you want to in the future, treat your next home purchase like an investment.

Lisa Harrison was glad she turned her home into an investment property.

“It reduces anxiety because you don’t have to go through the process of finding and bidding on a property,” she said. “Also, you’ll likely already have a mortgage on it so you get to skip that hassle, too. But for me, the best thing about turning a current home into a rental is that you’re familiar and comfortable with the property. You know all the quirks and how to deal with them.”

Purchase & hold: Mu

Final Thoughts

Before you check out, double-check start real estate investing against current offers and any coupons you can stack. Small habits like this add up to real savings over a year.

Originally published at dollarsprout.com.