Real Estate Investing for Beginners: Your Complete Guide

Embarking on the journey of real estate investing for beginners can truly be a game-changer. Karen Hatcher bought her first real estate property in her mid-twenties. “I just was ready to take control of my future,” says the Atlanta-based entrepreneur. “And being able to do that really set such a strong foundation for me financially, as well as mentally and for my confidence.”

Today, Hatcher is the owner of Sovereign Realty and Management, a real estate investment and property management brokerage, helping professionals of all backgrounds dip their toes into real estate investing. 

While the industry can be quite lucrative, Hatcher says a lot of her clients, like her, find value in the work beyond long-term wealth. “They love the fact that they are providing a quality, safe home for another family or just a person to live in,” she says.

There are several paths to real estate investing for beginners, depending on your needs, purpose, budget, and availability. Whether you’re interested in picking up real estate investments as a career or just an extra source of income, we’ve got you covered with a breakdown of the types of opportunities out there—plus, expert-backed advice for getting started.

4 types of real estate investment opportunities for beginners

No matter the project, location, or market you’re dealing with, “your job as a real estate investor is to find the angle that other people don’t see in the property so you can maximize the profits,” says Michael Gevurtz, a real estate investor and the CEO of Bluebird Companies, which specializes in private lending, development, and construction management. 

This could involve one or more of the following strategies:

1. Flipping

Flipping real estate means you buy a home or property that needs some kind of work—whether a small renovation or complete teardown—then sell it at a higher price to cover the costs associated with the rebuild, along with the profit margin you want to make. 

The benefit of this tactic is that you don’t have to start from scratch and invest a whole lot of money into making the house marketable. Hatcher even advises beginner clients to scout for cosmetic flips, where the renovation is as simple as laying new carpet or painting the walls. 

The process is also typically quicker than other real estate investments, with payout happening as quick as a few months or a year.

However, “if you’re directly purchasing property, you’re typically responsible for the management of that property, or at least the management of the partnership that owns it,” Gevurtz says. In other words, if anything goes wrong—things break, say, or the home doesn’t comply with local regulations—you’re in charge of fixing the problem or hiring someone to handle it.

2. Buy-and-hold

Buy-and-hold involves purchasing an apartment, home, space, or building and leasing or renting it out to tenants. You’re “holding” onto the asset in order to build a long-term, passive income stream. “For those who don’t have a lot of experience or a lower risk tolerance, I’ll typically advise those types of investments,” Hatcher says.

The upsides to this strategy is consistent revenue over time that can also cover costs like a mortgage or your personal bills. Your property might also increase in value as the market shifts, meaning you can sell it for a higher price than you bought it down the road.

But with buy-and-hold, the returns aren’t immediate, and can sometimes take years to accumulate. “People think that you can do buy-and-hold and rent and make this big cashflow every month, and that’s not typically the case,” says Hatcher. “You’re really getting the equity growth over time.”

Another downside, she says, is issues with tenants not paying rent or destroying property. “You’ve got to make sure you’re doing preventative maintenance on the home. If you’re not doing preventative maintenance on the home, you’re going to run into larger repair issues over time,” she adds.

Finally, you have to have a good handle on short-term rental laws and local jurisdiction to avoid fees or criminal charges.

3. New development

Building a new home or residential building on purchased land stimulates your local economy and gives you the most control on your investment. However, the costs and time commitment of doing so are steep, and there’s likely to be plenty of red tape to navigate.

4. Real estate investment funds

Real estate investment trusts (REITs) and funds function a lot like mutual funds or investing in the stock market—you’re financing real estate companies and developers who build, sell, and manage income-generating properties, and you stand to make a return on your investment if those properties are profitable.

This route requires the lowest lift, and can still have a significant payoff. “Obviously, you don’t control the project, but you also don’t necessarily need expertise if you’re investing with the right person or the right organization,” says Ken Weinstein, a Philadelphia-based residential and commercial real estate developer and Founder of Jumpstart Germantown—an organization that mentors aspiring developers. 

Gevurtz breaks down the positives. “You can buy more, you can sell, depending on your situation or where you think the value is, and you don’t deal with all the operational things that go on with owning that property,” he says. “Whereas if you buy a property directly, it’s typically a longer-term, more time-consuming and intensive process.”

But proceed with caution when pursuing REITs. “Make sure you understand who they’re partnering with, that they’ve got a solid track record and they know exactly what they’re doing,” Hatcher says. “Don’t just go off someone’s followers. Just because someone has the gift of gab on social media does not make them qualified.” 

How to invest in real estate: 6 tips for beginners' success

1. Define your goals

In discussions with new clients, Hatcher says, “my first question is, ‘Why are you investing in real estate?’ And everyone has a different reason.” Some people, she notes, want to find a house their kids can live in one day. Others are drawn to the tax breaks and write-offs. 

When you’re clear on your goals for investing in real estate, you’re better able to choose properties and opportunities that fit those needs—and avoid costly mistakes in the process.

2. Figure out your risk tolerance

After defining your goals, you have to get a sense of how much risk you’re willing to take on, both financially and emotionally. “I have some clients that want very safe investments,” Hatcher says, which could mean exploring property in neighborhoods where there’s historical proof of success.

Others, she said, are open to testing out emerging markets, where the risk of failure is higher but the reward could be bigger.

3. Start with what you own and know

If you own a home, congratulations—you’ve already taken the first step toward real estate investing! Experts say beginning with upgrading and marketing your own property is a great way to get a lay of the land.

“Everybody should start in small-scale residential and learn how to do real estate development, and get more into commercial development down the road if that’s the path they want to pursue,” says Weinstein.  

4. Find your tribe

There are a lot of boot camps and programs out there that provide aspiring investors with the tools, skills, and connections to break into real estate. Before you sign on the dotted line, do your research—and don’t expect the course to do all the work for you. 

“There is nothing easy about real estate development,” Weinstein says. “You have to work hard at it. It can be very rewarding, but anyone who tells you it’s easy and you can do it quickly, they’re lying to you.”

Finding a mentor can also help you navigate new terrain—and that person can come from anywhere, be it a family connection who used to manage office spaces or an old coworker who owns an Airbnb side business. 

“The best way to get into the business is having a mentor, someone who’s done it before and can tell you the good, the bad, and the ugly,” Gevurtz says. “The deeper relationships you have, you’re going to do better.”

Finally, surround yourself with industry experts—designers, realtors, builders, brokers, even accountants—who can do some of the heavy lifting for you, especially in areas you’re weakest. 

“You really need smart people around you,” says Hatcher, who prefers to outsource her design needs when furnishing a property. “They're going to protect your assets for you. I always say, go for value.”

5. Do your research

Picking a market or niche to work in requires deep knowledge of the subject. “If you don’t know the market intimately, you can find yourself in a really risky situation,” Hatcher says. She recommends subscribing to real estate publications and blogs, reading books, listening to podcasts, and searching for rent or sale prices on websites like Realtor.com or Zillow.

“Look at lots of opportunities, look at lots of properties, understand what you’re investing in, and then jump in once you feel comfortable,” Gevurtz says.

“There’s an old saying in real estate, ‘It’s all about location, location, location.’ And it’s really true,” he says. “I’ve made some mistakes early on by not buying good locations, and I’ve also done really well purchasing properties in great locations.” 

6. Consider your impact

Those who want to do good—in addition to making a lot of money—should consider the larger impact their investments could have on a community. For example, could you develop properties close to public transit as a way to reduce carbon emissions? Or renovate old factories into retail space instead of building on open land?

“We need industrial development in order to produce jobs. We need commercial development in order to help small businesses start and grow, which produces jobs,” Weinstein says. “So every type of development is needed. People who are considering getting into real estate development should consider the consequences of what they’re doing as they’re developing.”

Real estate investing, more than anything else, takes patience, drive, and discipline—and a willingness to always be learning

“You never stop learning,” Weinstein says. “37 years in, I continue to learn every day by doing different types of projects.”