Real Estate Investing in Normal Terms – Everything You Need to Know About Buying an Investment Property

Have you ever been confused by the idea of real estate investing? Like, wtf is it? Is it only for millionaires and people in business suits?

If you’ve ever wondered about the difference between investing in real estate and buying a property to live in, you’ve come to the right place! I’m going to try to break it down in “normal”, easy to understand terms so it feels less intimidating!

Because knowledge is power! And it honestly doesn’t need to be some hush hush, insiders only topic. It’s not a secret society, investing in property & real estate is literally one of the best ways to set yourself up for success and shouldn’t feel like an out of reach idea.

Let’s Chat Real Estate Investing & Buying An Investment Property

Before we get into the various types of real estate investments, let’s clarify the difference between real estate investing and buying property to live in.

When you purchase a property to live in, you’re primarily focused on finding a place that suits your lifestyle and personal preferences. However, real estate investing involves purchasing properties with the intention of generating income, either through rental returns or appreciation in value.

Let’s break down a few terms that might help things make more sense:

Cash Flow: Cash flow is the income or money you make from your real estate investment after deducting expenses like mortgage payments, property taxes, insurance and maintenance costs. Positive cash flow means your rental income exceeds your expenses, while negative cash flow means your expenses outweigh your income. Positive cash flow is generally a good thing because it provides you with income and helps cover your investment costs.
Appreciation: Appreciation refers to the increase in the value of your property over time. Real estate values tend to rise in the long term, allowing you to potentially sell the property at a higher price than what you paid for it. Property appreciation can be influenced by factors like location, market conditions and improvements made to the property.
Rental Income: This is the money you receive from tenants who rent your property. It can give you a steady stream of cash flow and contribute to your investment returns. Setting the right rental price is important to attract tenants while covering your expenses and generating profit.
Financing Options: Real estate investing often involves getting financing to purchase the property. Like a mortgage loan. It’s important to understand different financing options available to you, including interest rates, loan terms and down payments. Evaluating your financial situation and working with a mortgage broker can help you choose the most best option.
Risk Management: Like any investment, real estate involves certain risks. Market fluctuations, unexpected expenses and vacancy periods are some of the risks associated with real estate investing. It’s important to determine and manage these risks by conducting thorough research, having financial reserves and considering factors like location, property condition, and demand.
Professional Guidance: Real estate investing can be complex, especially for beginners. It’s helpful to get professional guidance from people like real estate agents, financial advisors and property managers who can give you helpful insights, advice and help you navigate the process.

Fixer Uppers or Flips

Fixer Uppers, also known as Flips, are properties that require renovation or repair work before they can be sold or rented out. This type of investment can be appealing for people who enjoy hands-on projects and have a knack for remodeling.

Some benefits of Fixer Uppers include:

Potential for quick profits: By purchasing a property below market value, investing in renovations and selling it at a higher price, you can potentially make a substantial profit.
Creative outlet: Flips allow you to unleash your creativity by transforming a run-down property into a beautiful, desirable home.
Short-term investment: Flips often involve a relatively shorter time frame compared to other real estate investments, allowing for a quicker return on investment.

Long-Term Residential Properties

Investing in long-term residential properties involves buying houses or apartments with the intention of renting them out to tenants.

This type of investment provides a steady stream of rental income and potential long-term wealth accumulation.

Some benefits of long-term residential properties:

Passive income: By renting out your property, you can generate a steady monthly income, helping to cover mortgage payments and potentially provide extra cash flow.
Property appreciation: Over time, your property’s value may appreciate, resulting in a significant return on investment if you decide to sell it later.
Tax advantages: Real estate investments often come with tax benefits, including deductions for mortgage interest, property taxes, and depreciation.

Apartment Investment - Real Estate Investing

Vacation Rentals

Vacation rentals involve purchasing properties in desirable destinations tourists want to visit and renting them out to on a short-term basis. This investment option can be particularly lucrative in popular travel hotspots.

Some these benefits of vacation rentals:

Higher rental income potential: Vacation rentals can generate higher rental returns compared to long-term residential properties, especially during peak travel seasons.
Personal use: Unlike other types of real estate investments, vacation rentals allow you to enjoy the property yourself during periods when it’s not rented out.
Flexibility: You can choose to manage the property yourself or hire a property management company to handle bookings, guest inquiries, and maintenance.