Beginner, Intermediate, & Expert Types of Real Estate Investing

By 20-somethinglife | August 4, 2021

From buying your first property to investing in real estate investment trusts, this article will walk you through various types of real estate investing you can pursue at different stages of your investing career.

Investing in Real Estate as a Beginner

Beginner real estate investing can seem like a daunting task without previous experience, but everyone has to start somewhere. When investing in real estate as a beginner, look into the following options:

Your first home – Typically, the first real estate investment that one would make would be to buy their first home. That could be an apartment, condo, home, or even van down by the river if you’ve really been saving up. Whether or not you buy a remodeled home or a fixer-upper with the intent to flip it, you’ll want to make sure you invest wisely with this purchase. The advice here hasn’t changed over the years – location, location, location.
Renting out a room – Now that you’ve got your first home or apartment, should the space be available, it may make sense to rent out a room to help offset the cost of the mortgage along with the many other costs of home ownership that will undoubtedly hit your wallet. This is also be a great source of income to help pay for any renovations or upgrades your place may need.
Rental property – Once you’ve got your first property in place with the mortgage and your finances in a healthy place, rental properties become an option. Rental properties have the advantage of (hopefully) growing in value over the course of your ownership while also providing a source of income to pay the mortgage. Outside of the initial down payment and maintenance upkeeps, you can essentially have someone else pay off your mortgage over time. Of course, it can be challenging to find renters and that’s why some folks who own multiple rental properties choose to utilize a property management company who take a small fee to handle all different aspects of the rental.
Buying REITs (Real Estate Investment Trusts) – REITs are arguably the easiest way for you to invest in real estate without purchasing a property. They are similar to mutual funds where you are essentially investing in companies that own commercial real estate like office and retail spaces, multi-family properties like apartments, or even hospitality locations like hotels and motels.

Intermediate Real Estate Investing Options

As we move into the more intermediate types of real estate investing, we’ll see that these options typically require more risk, money, and/or effort, although not always!

Flipping houses – Buying, renovating, and re-selling homes can be a risky and difficult process but can ultimately be profitable with the right amount of effort and luck. Made popular by countless HGTV shows demonstrating the process, it’s possible to find plenty of resources that can teach you the ins and outs of it. The biggest hurdle is typically having the skills to be handy and do the renovations by yourself as paying for outside contractors can quickly eat up any potential profit.
Hold and sell – This option is for the person who thinks the real estate market a home or property is located in will go up, but doesn’t want to flip the house – or maybe it’s already renovated! This is a simpler strategy of buying the home and just holding it until the value increases to where you can sell at a profit. It is a bit riskier for a few reasons:
1. Without tenants, you’ll be paying the cost of the mortgage so you’ll need to make sure you can budget that in.
2. Paying realtor fees on both ends of the transaction could wipe out most of the profits. If you’re experienced and can act as your own realtor, this becomes less of an issue.
3. If the market drops, you could be stuck holding the property for a longer period of time than anticipated tying up your funds that you could be investing elsewhere. Should it stay low and you later need the funds, you would then be forced to sell at a loss.
Real estate crowdfunding – Traditional crowdfunding is when a project, venture, or business is financed by many individuals investing small amounts of money. Real estate crowdfunding follows a similar format. For many individuals, buying an entire apartment or home is out of their financial reach. Yet, through crowdfunding, they can team up with other similar investors and become a shareholder in a real estate project. Often times, these projects are organized and managed by a company who will take a cut of the profits alongside the shareholders. Some of these real estate crowdfunding investment opportunities start for as little as $1k. That’s a far lower amount than buying a home outright for any of the investing options listed above.

Expert Real Estate Investing

Expert levels of investing is typically reserved for high-net-worth individuals or those who can meet the accredited investor requirements.

The Securities and Exchange Commission (SEC) defines an accredited investor if they meet any of the following criteria:

an individual or couple who have an annual income exceeding $200,000 or $300,000, respectively, each of the last two years
have a net worth of over $1 million, not including the value of the primary residence

Let’s take a look at some of these types of investments:

Investing in commercial real estate – Instead of investing in residential property, some individuals choose to invest in commercial real estate like office buildings, malls, grocery stores, industrial estates, manufacturing shops, and more. These properties are often much more expensive than residential properties and can be much more difficult to manage as there may be multiple tenants and the real estate may require more expensive upkeep.
Real estate syndication – This type of investing is often compared to real estate crowdfunding as on the surface they seem to be very, very similar. The key difference is that real estate syndication is a specific partnership between the sponsor and the investors where the sponsor is the primary owner of the real estate property. Thus, crowdfunding is sometimes syndication, but not all crowdfunding investments are set up this way. For example, a crowdfunding platform may own 0% of the property with the collective investors owning 100%. Thus, the crowdfunding organizer takes profit without taking on any of the risk. Syndication offers an advantage here as the sponsor (think organizer and manager) is invested in making sure that the project succeeds. One downside of real estate syndication is that it is usually only available to accredited investors, as previously defined.

Real estate has shown to be a smart investment over the years and with a housing shortage in the US predicted through 2031, the sooner you can take advantage of its possibilities, the better off you will be! Investing in real estate as a beginner can seem daunting, but with patience, saving money every day, a well-thought-out plan, and smart investing your money will begin to work for you quickly.

5 Small Ways to Save Money Every Day

By 20-somethinglife | February 16, 2018

There are countless articles about all the different ways to save money by not going out to eat, cutting your cables, and giving up your entire existence and living in a shack in the forest. While that all sounds realistic…

Here are five actual ways to save money, every day, without completely changing your lifestyle or what you do on a day to day basis.

Ways to Save Money

Meal prep with friends
- One of the worst parts about meal prepping for your whole week on Sunday is that you generally prepare the same dish, in a mass quantity, leaving you to eat the same thing for lunch or dinner every day. It gets old after about the second time you’ve had it. That’s where sharing cooking responsibilities with friends come in. Get together with 4-5 friends and have everyone decide to cook a different dish, but enough to prep for a week. This way, you’ll have a different meal each day when really you only had to make one big meal up front. It saves money, time, and you won’t hate what you’re eating by Wednesday afternoon. Let’s look at cost savings. A home cooked lunch will likely cost around $5. If you get lunch at work, it’ll likely cost around $10. So each time you eat a prepped meal instead of eating out, you’ll save at least $5. If you do that at least four times a week, you’ll be saving over $1,000 each year.
Skip the drink at lunch or dinner when eating out
- It’s unrealistic to think you’re not going to go out to lunch with co-workers or grab a bite to eat during the week with friends you haven’t seen in awhile. It’s also a well known fact that the margins on drinks at restaurants is incredibly high. That goes for even sodas, iced teas, lemonades…you get the picture. So while you’re out eating, just stick with a water. You might only save a few dollars each time, but if you go out to eat multiple times a week, this can really start to add up. As an example, if you go out to eat three times a week, you could save around $5. Over 52 weeks, that translates into $260 that you could have padding your bank account instead. Besides, water is probably better for you anyway.
Put money into an IRA automatically
- While this doesn’t directly decrease the amount you spend every day, it certainly has a long term impact that you may not even notice. Many online financial investment options, like
  Betterment or Mint, allow you to auto-deposit any amount you’d like into accounts that automatically invest for you, or into IRAs and Roth IRAs. With most of these apps and online institutions, you can set the auto-deposit on a recurring schedule. Start with a small amount and do it as frequently as possible. Can you afford to put in $10 a week? If yes, great, just start there. Over the course of the year, you’ll have saved up an additional $520 into your retirement accounts without even noticing and this doesn’t take into consideration the money you’ll be earning on the investment side of things from dividends and the like.
~~Skip the your morning coffee~~ Get a smaller sized coffee
- Could you imagine the outrage if I had actually advised skipping coffee altogether? Definitely not realistic. But, could you go with a slightly smaller amount? Again, like drinks while eating at a restaurant, you’re not going to be saving much here on a daily basis but over time is where this adds up. Let’s say it’s $1 a day in savings and you buy a coffee every weekday. That’s another $260 every year.
Only use credit cards that gives cash back
- Most credit cards now offer a cash back often of at least 1% with some going even higher. As long as you don’t abuse them, they’re totally worth it. Some people only choose to use debit cards as they only want to spend what they have and don’t want to take on any debt. There’s two issues with this: 1) this doesn’t help to build up your credit history and 2) you don’t get the cash back advantages of credit cards. The trick here is to make sure you limit your credit card spending to what you’d normally spend on a debit card. Additionally, you need to make sure you pay off the credit card in full, every month. As long as you don’t accrue any interest, you won’t have any problems. To put some numbers to this, let’s say you spend $50 a day, on average, on your credit card. This might sound like a lot but if you include rent, all meals, gas, and more, this is less than $19k a year total which is typical. 1% back on $50 is $0.50. Woah, crazy right? O.K. maybe not that crazy. But let’s expand that to a year. 365 times $0.50 is $182.50. So if you use a credit card and pay it off in full each month, you’ll have an extra $182.50 that you wouldn’t have had if you had only used a debit card.

The Results

Let’s add all of these ways to save money up on a yearly basis:

$1,040 in savings from meal prep
$260 from getting water when eating out
$520 in retirement savings automatically
$260 from getting a smaller sized coffee
$182.50 from using a credit card (and not accruing interest)

Total: $2,262.50

And that’s just from these five simple ways. Now it looks a lot easier to afford that trip you’ve been wanting to take!

Looking for other ways to save money? Check out our guides to buying cheap sunglasses and affordable art.