How to Invest in Real Estate: 5 Starter Strategies for Financial Growth

SUMMARY: If you're aiming for financial freedom through real estate, I recommend starting with rental properties to potentially earn up to $30,000 a year in passive income with just 10 properties. Charles Schwab, Interactive Brokers, and IBKR Lite are my top platform picks for low fees and user-friendly experiences while alternatives like Webull, Fundrise, and RealtyMogul offer additional pathways to grow your real estate portfolio and wealth.

Are you tired of the minimal returns on traditional investments and looking for a solid path to financial freedom?

With a wealth of experience in the real estate market and an analytical approach to investment opportunities, I provide unbiased and thorough reviews to navigate the complex world of real estate investing.

My mission is to empower you with the knowledge and tools needed to make smart financial decisions and build your wealth with confidence.

Read on to uncover the stepping stones to lucrative real estate investments that can pivot you from being savings-focused to income-generating.

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Features & Product Aspects to Look For

When diving into real estate investment, the array of platforms and opportunities can be overwhelming. To cut through the noise, it's essential to understand the key features that make an investment opportunity worth considering.

Investors should aim for platforms that boast robust educational resources, empowering you to make informed decisions. Accessibility is another critical feature; from interactive tools to simplified dashboards, the ability for investors to navigate and manage their investments with ease cannot be overstated.

Lastly, financial barriers should not deter aspiring investors. Look for platforms with $0 fees per trade and no account minimums to maximize your investment potential from the get-go.

Action Tip: Sign up for a demo or utilize free tools offered by investment platforms to get a hands-on feel for the interface and resources available.

Common Mistake: Novice investors often overlook the importance of a platform's user experience, which can lead to confusion and missed opportunities down the road.

Stat: Real estate has consistently outpaced the S&P 500 over the past 20 years, underlining the value of investing in tangible assets for long-term financial growth.

Product Roundup

BEST WAY! Rental Properties: Your Gateway to Financial Independence

The road to accruing substantial passive income often leads to the realm of rental properties. For many investors, the allure of this pathway lies in its tangible assets and the potential for consistent cash flow.

Imagine the prospect of earning an additional $250 per month from a single property—this equates to $3,000 annually without having to clock in daily for work.

Now scale that up to 10 properties, and you're looking at a sweet sum of $2,500 monthly, or $30,000 a year, all generated passively.

Envision further expansion to 20 properties and that monthly income soars to $5,000, accumulating to $60,000 yearly, and all this without exchanging your time for money.

Action Tip: Start with a single rental property that has good market value and rental demand. As you grow your portfolio, leverage your equity to finance additional properties and amplify your income streams.

Stat: According to the U.S. Census Bureau, the median rental income for investor-owned properties was approximately $1,750 per month in 2021, laying down a solid foundation for investors to build and scale their real estate empires.


 
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Charles Schwab: The Investor's Choice for Diverse Real Estate Investment Options

Charles Schwab represents the strength and reliability preferred by discerning investors embarking on their real estate journey.

As a leader in the brokerage industry, it combines a robust platform with the advantage of $0 trade fees, fostering an environment where your investment can grow unhindered by unnecessary costs.

Charles Schwab’s lack of a minimum balance requirement invites investors of all levels to begin their real estate portfolios with confidence, offering access to a variety of real estate investment trusts (REITs) and other real estate linked securities.

The ability to spread your investments across different types of real estate assets is an effective way to mitigate risk and tap into different segments of the market.

Action Tip: Consider starting with REITs to gain exposure to a diversified portfolio of real estate investments that are easily traded like stocks. This is a simple way to dive into real estate without the complexities of direct property management.

Common Mistake: Avoid putting all your eggs in one basket. Diversification is crucial, and while REITs offer it internally, complementing them with other investment vehicles broadens your risk management strategy.

Stat: Data from the National Association of Real Estate Investment Trusts shows that as of 2021, public REITs owned an estimated $3.5 trillion in gross real estate assets, with more than $2.5 trillion of that total from publicly traded REITs. This illustrates the vast market available through investment platforms like Charles Schwab.


 
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Interactive Brokers: A Platform for the Savvy Real Estate Investor

Interactive Brokers (IB) has established itself as a bastion for seasoned investors looking to engage with real estate markets. Famed for its advanced trading tools, this platform offers $0 fees per trade and no account minimum, providing a cost-effective entry into the world of real estate securities and worldwide exchanges.

With IB, real estate investment becomes a global venture, granting access to international markets and the ability to participate in the economic landscapes of different regions. Their extensive offerings in REITs and global real estate ETFs allow seasoned investors to fine-tune their portfolio to align with precise investment goals and market trends.

Action Tip: Take advantage of Interactive Brokers’ global reach to diversify across countries and currencies, potentially hedging against domestic market volatility and capitalizing on foreign market growth opportunities.

Common Mistake: Complexity can be overwhelming with advanced platforms. Ensure you thoroughly understand the tools and the markets you are diversifying into to avoid costly errors due to lack of knowledge.

Stat: A study from the Urban Land Institute and PwC revealed that 52% of investors plan to increase their real estate portfolios in 2021, with a significant focus on cross-border strategies for diversification and resilience. IB’s platform is well-suited for investors who wish to be part of this trend.

Rental Properties: Your Gateway to Financial Freedom

Imagine the delight of receiving a steady stream of income without the daily grind; that's the allure of investing in rental properties, our top recommendation for building financial independence.

By intelligently acquiring rental properties, you can establish a robust passive income source. For example, owning just one rental property can translate to an additional $3,000 per year. Scale up to 10 properties, and we're talking about a substantial $2,500 each month.

And with 20 properties, you could be looking at a life-changing $60,000 annually, all without exchanging your time for money.

Action Tip: Start by acquiring a single rental property, ensuring it yields a realistic positive cash flow after expenses, then methodically expand your portfolio as you become more comfortable and financially equipped.

Common Mistake: Avoid overleveraging yourself; be wary of taking on too much debt or risk initially. Instead, build your real estate empire on a foundation of prudent financial decisions.

Stat to Know: Trends indicate that real estate investors make an average of $1,000 profit per rental property each month, with the potential for much more depending on location and management efficiency.


 
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Real Estate Investment Groups (REIGs): Collective Power

Real Estate Investment Groups offer a simplified entry into rental properties without the hassle of management.

By joining a REIG, you're pooling resources with other investors to own units within an apartment block or a set of properties, while the managing company takes care of maintenance and tenants. In return for this convenience, you share a portion of the rent as a fee.

Action Tip: Carefully research different REIGs, considering their track record and member reviews, to find one that aligns with your investment goals.

Common Mistake: Neglecting due diligence can lead to joining a mismanaged REIG, impacting your returns. Make sure the management team is reputable and the investment terms are transparent.

Stat to Know: REIGs can yield an average annual return of 11-15%, based on historical data, making them an enticing option for hands-off investors.


 
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Fix-and-Flip: The Hands-On Approach

For those who relish the idea of transformation and tangible results, fix-and-flip is your playground. It involves buying properties in need of renovation, upgrading them, and selling at a profit. While potentially lucrative, this strategy requires market insight and renovation skills—or the budget to hire professionals who do.

Action Tip: Leverage resources like local real estate networks and online analysis tools to pinpoint undervalued properties with profitable flip potential.

Common Mistake: Underestimating renovation costs is a major pitfall. Ensure you budget for unexpected expenses to protect your profits.

Stat to Know: On average, successful fix-and-flip investors can make between 20-33% in profit margins, but precise numbers vary widely across markets.

Real Estate Investment Trusts (REITs): Hassle-Free Investing

REITs allow you to invest in large-scale real estate without owning the properties yourself. They’re companies that own income-producing real estate and are known for paying out regular dividends, making them a popular choice among those looking for a more hands-off approach.

Action Tip: Diversify your investments by choosing REITs across various sectors, such as residential, commercial, and healthcare, to spread risk and capitalize on different market trends.

Common Mistake: Don't mistake high dividend yields for total returns; factor in the growth potential and stability of the trust.

Stat to Know: REITs have provided an average annual return of approximately 10-12% over the past 20 years, enticing investors seeking both income and wealth appreciation.

Crowdfunding Platforms: The New Frontier

Crowdfunding platforms are revolutionizing the real estate landscape, allowing individuals to invest in property ventures with relatively small capital. These digital marketplaces enable you to contribute to various projects and reap potential rewards proportional to your investment.

Action Tip: Tap into the potential of crowdfunding by starting with small investments in several projects to mitigate risk and learn the ropes.

Common Mistake: Ensure you're not swayed by unrealistic project returns without understanding the associated risks thoroughly.

Stat to Know: Crowdfunding in the real estate sector is projected to reach a staggering $300 billion by 2025, suggesting a promising avenue for growth and earnings.

Investing in Real Estate Syndications

For investors who aspire to participate in larger commercial real estate ventures but lack the capital to go it alone, real estate syndications are a compelling option.

These collaborations pool together funds from multiple investors, allowing you to take part in significant projects, often managed by seasoned professionals. With this kind of investment, you can tap into high-value asset returns while spreading your risk.

Action Tip: Join forces with experienced syndicators who have a proven track record. Do your homework on their past projects and investment strategies to ensure they align with your financial goals.

Common Mistake: Don’t overlook the importance of understanding the legal structure of the syndication. Being clear about your rights and obligations can prevent future complications.

Stat to Know: Over $16 billion was raised through real estate syndications in the United States in 2020, indicating a robust and fruitful avenue for investment collaboration.

Master Limited Partnerships (MLPs)

Master Limited Partnerships present another phenomenal route for those interested in the real estate market's profitable income potential. Particularly prevalent in the energy sector, MLPs combine the tax benefits of a partnership with the liquidity of publicly traded companies, making them an attractive prospect for income-focused investors.

Action Tip: Select MLPs with assets that generate steady cash flows, such as pipelines or storage facilities, to benefit from consistent distributions.

Common Mistake: Don't ignore the tax implications of MLPs; consult a tax professional to fully grasp how they might affect your investment earnings.

Stat to Know: Historically, MLPs have provided substantial yields, often exceeding 6%, making them a tantalizing choice for those seeking stable income streams.

Conclusion

Through careful analysis and expert insight, we've pinpointed top-tier platforms that lay the groundwork for lucrative real estate investment, providing financial freedom that's both attainable and sustainable.

  • Unlocking the door to financial liberation, rental properties not only offer a steady stream of passive income but can propel you towards an exhilarating reality where managing 20 properties could mean a $60,000 annual income, without the constraints of a 9-to-5 job.
  • Charles Schwab's seamless platform invites both seasoned and novice investors alike to dabble in real estate without the burden of trade fees or account minimums.
  • Interactive Brokers stands out with its sophisticated platform and zero fee structure, catering to those who seek a comprehensive and professional investing environment.
  • IBKR Lite simplifies your entrance into real estate investment, presenting a user-friendly interface free from the complexities of trade fees and account requirements.
  • Exploring alternatives like Webull offers the thrill of promotions, while Fundrise and RealtyMogul connect you to tangible real estate projects, giving a taste of the developer's life with potential monthly yields.

As you venture into the realm of real estate investment, bear in mind that the path you choose should align with your financial goals and investment style.

This strategic diversification can be the cornerstone of your wealth-building strategy, leading to that coveted financial freedom. Remember, investing in real estate isn't just about accruing assets—it's a step towards crafting the lifestyle you envision for yourself and your loved ones.


Real Estate Investment FAQs

What are some strategies for investing in real estate?

There are numerous strategies for investing in real estate – from purchasing rental properties, flipping houses, owning vacation rentals, investing in commercial real estate to participating in real estate investment trusts (REITs).

Each strategy comes with its own set of risks and rewards, and the right approach depends on your financial goals, resources, and risk tolerance.

How can investing in real estate lead to financial freedom?

Investing in real estate can lead to financial freedom through the creation of steady, passive income streams from rental properties, potential appreciation of property values over time, and the use of leverage in financing properties.

As the income from your properties exceeds your living expenses, you achieve financial independence – the ability to live without relying on traditional employment.

What are REITs and why are they significant for real estate investment?

Real Estate Investment Trusts (REITs) are companies that own, operate, or finance income-generating real estate.

REITs are significant because they provide a way for individual investors to earn a share of the income produced through commercial real estate ownership without having to buy, manage, or finance any properties themselves. They are known for offering high dividend yields and are a popular choice for income-seeking investors.

What should I consider before investing in rental properties?

Before investing in rental properties, consider factors such as your knowledge of the local real estate market, the cash flow prospects of the property, your management capabilities, the condition and location of the property, and the potential for both short-term rental income and long-term property appreciation.

Additionally, it's important to have a clear understanding of the financial and legal responsibilities of being a landlord.

How much money can one expect to make from a single rental property?

The amount of money you can expect to make from a single rental property varies widely based on several factors, such as the property's location, rental market conditions, the property's purchase price and associated expenses, and your financing strategy.

On average, a small rental property could yield a modest passive income of around $250 per month, equating to $3,000 annually, but this is highly situational and dependent on numerous variables.

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