Investing in real estate can be a great way to build wealth — there are a number of strategies you can use to begin making money as a real estate investor. You could even parlay your real estate investments from a profitable side hustle to your main source of income.
If all of your investments so far are in the stock market, and you have no idea how to get started making real estate investments in Oakland, then you’re not alone. Purchasing one investment property or more can be a fantastic way to achieve your passive investing goals, but navigating the whole process of expanding your investment portfolio as a total beginner can be a challenge.
In this article, you’ll find our best advice for novice real estate investors. We’re sharing details of how the market works in Oakland, ways you can finance your investment as an Oakland resident, and provide a few beginner-friendly strategies for diving into real estate investing.
Buying a House in Oakland — From Rental Properties to Property Taxes
To take it back to basics, real estate investing is the purchase of land and/or property on that land. There are various categories of real estate investing, with the most common ones being residential, commercial, and industrial.
But How Does Real Estate Investing Make Money?
The two key ways that a real estate investor makes money from physical properties are value appreciation and rental income:
- Value Appreciation: In general (although this is by no means guaranteed), property values increase over time. There are several reasons why this happens — property values can rise because of the desirability of a neighborhood or improvement work that the owner does on a property. If you are investing in real estate, it’s a good idea to read up on projections, statistics, and trends from a number of sources.
- Rental Income: When you buy a rental property, the most common goal is to generate a monthly rental income from the rate tenants pay to use the space. Rental properties can be classed as passive investments if you employ a property manager to take care of the day-to-day management. Income-producing properties should hopefully generate enough income to cover your mortgage payments and give you a little (or a lot of) profit in the long run.
Strategies For Beginners in Real Estate Investing
These are some of the beginner-friendly investing strategies we recommend as a good place to start investing.
The following 6 methods are a good way for Oakland natives to dip a toe in the local property market and build a network in the niche before they move on to more advanced strategies.
- Prehabbing:
Prehabbing is a clever way to do minimal work but still achieve maximum gain. With this strategy, the investor purchases an investment property and completes a few minor cosmetic updates. They then sell to another investor who completes a full rehab. - Real Estate Investment Trusts (REITs):
Real estate investment trusts (REITs) own and manage properties on behalf of a group of investors. Those investors purchase shares in the REIT and make passive income that way. The beauty of choosing the real estate investment trust method of investing in real estate is that there is no down payment or closing costs to pay because you aren’t purchasing actual physical properties. - Rental Property Investing:
This is the classic way to invest in real estate. You speak to a real estate agent, you find a property, agree on a purchase price and snap! You’re a landlord with a monthly cash flow. In our experience, we’d lean towards recommending investing in multifamily if you go down this route, as it is generally a much better route to help pay your mortgage.
When you buy a house with more than one unit, you not only get the benefit of personal use (if desired), but you also have one or more investment units that can be rented out.
One of the advantages of going this route is that as long as you plan to live in one of the units yourself, you can use a mainstream primary residence mortgage to finance your purchase at much lower interest rates and generally easier to qualify for terms as compared to mortgages for investment properties. - Buying a Vacation Home
A vacation home can be a good way to get started in real estate investing — your property will both provide you with somewhere to gently stay when you travel, and you can charge other visitors rent when you’re not using it. - Real Estate Syndication
We liken investing in a real estate syndication to investing as a team sport. It works by allowing a group of investors to put all their money into one pot and buy larger-scale properties, holding onto them for a defined time period, then splitting the profits on its sale. - House Flipping:
Flipping houses is a way to buy properties but only hold them for a short time. The process involves buying a property, renovating it, then selling it on for profit.
Benefits Of Investing In Real Estate
In addition to building long term wealth through real estate investments, you’ll also be able to take advantage of a number of tax incentives associated with real estate investing. Real estate has the potential to be an effective method of offsetting your tax obligations through potential deductions, including; depreciation deductions, business write-offs, and a pass-through deduction for LLC owners.
Buying property, in whatever form you chose, is a solid way to build equity and can help provide you with a range of financial options. Property generally appreciates over time which you can leverage to purchase more real estate. Investing in real estate is also a canny way to diversify an investment portfolio. Stocks can be risky, as we all know, but land and/or bricks and mortar provides investors a tangible asset and hedge against inflation.
Your Next Steps to Investing in Real Estate in Oakland
It can seem daunting to embark upon your own real estate investing journey, but with the right support, there is no reason why you can’t become successful building your wealth in this strategic way. Remember though, when you invest in the real estate market as a business venture, it is vital to go into it with your eyes open and do your due diligence.
Investing your own funds in property is a big step, so it’s imperative you do plenty of research. Once you’ve decided what kind of purchase you want to make, ensure that you dig into the details of the finances. Be honest with yourself about how much you can afford, and be clear about whether your income can support your planned payments.
If this sounds like something you might be interested in, let’s find a time to chat! We’d love to grab coffee, hear about your financial goals, and help you figure out a way to achieve those goals through real estate investing.
