Real Estate Investing for Beginners — A Guide to Getting Started

Real estate investing for beginners … (but don’t sell yourself short)

How do you get started in real estate investing? What are the proper channels, and what do you need to know? To begin with, don’t sell yourself short. If you’re here, you already understand the potential of real estate investing. And don’t feel daunted — these days, you don’t need a wealth of experience to get started. Real estate investing “for beginners” is absolutely achievable, and passive real estate investing may be a great next step beyond a traditional 60/40 portfolio.

And, if you ask the right questions and go through the proper channels, you will not be a beginner for long.

Real estate investing has long been a favored route to wealth creation, and for good reason. With a value exceeding $230 trillion globally, real estate stands as the largest asset class, offering a blend of long-term passive income, positive returns, and favorable tax advantages. For beginners, the allure of entering the asset class is strong, but it’s essential to approach it with a blend of enthusiasm and prudence. As of 2024, real estate investing for beginners isn’t about “tenants and toilets” or knowing how to hang drywall: it’s about asking the right questions, harnessing new wealthtech platforms, and educating yourself enough to be able to invest passively in alignment with your overall strategy.

“Real estate investing for beginners” might be considered synonymous with passive real estate investing. In short, passive real estate investing means contributing capital to a real estate project or transaction alongside an active manager, or “sponsor,” of the investment. This is not the only way of getting started with real estate investing, but it is how many self-directed investors get started with the asset class.

What can you achieve via passive real estate investing? Individual investors now have much more to choose from in terms of low-barrier-to-entry options.

Note that all investments, including real estate investments, entail risk. While it’s now possible to invest passively in complex CRE projects, it’s important that you understand the risks and educate yourself on the basics. EquityMultiple is here to help.

Real estate is potentially a timely asset class in inflationary periods. Although it was historically difficult for individual investors to access, this has changed with the advent of online platforms.

A Get-Started Checklist

Whether you should invest in real estate, and what channel to go through, comes down to a simple set of factors:

1. Do you have a substantial traditional portfolio? For the most part, you’ll want to make sure you are maxing out your 401k and allocating to a basket of public market securities before venturing into real estate.
2. What is your time horizon? If you are just getting started in real estate investing, you may want to take on at least some higher-potential-upside, higher-risk equity investments. If you are closer to retirement, you may want to take on a higher proportion of fixed-income real estate investments with a higher degree of protections, such as debt funds or preferred equity.
3. How much time, capital, and due diligence can you bring to the table? If you are an accredited investor with enough basic knowledge to be able to review risk factors and the basics of an investment thesis, you may want to consider private-market real estate, such as the types of investments EquityMultiple offers starting as low as $5k per investment. If you are earlier in your journey, you may want to consider private or public REITs.

Tailored Solutions for Those New to Real Estate Investing

With EquityMultiple and some of the other platforms available to accredited individual investors, you can get started easily. Still, you may want to take time to educate yourself and understand the mindset of other investors with whom you share characteristics. EquityMultiple takes into consideration several key demographic groups  — the investor “archetypes” that wish to add real estate to their portfolio, but seek resources to get comfortable making a first investment:

• Resources for physicians, who make up a sizable portion of EquityMultiple’s investor network.
• Perspectives such as “real estate investing through the lens of a younger investor.“
• The Basecamp series of Alpine Note, which offers enhanced terms for first-time investors.

Dr. Nirav Shah discusses considerations for newer real estate investors, and why a platform like EquityMultiple may hold appeal.

Real Estate Investing for Beginners: Understanding the Basics

There are different channels for getting started in real estate investing. We’ll get to those in a moment. First, a few fundamental things to understand about real estate investing if you are considering the sector:

• Return potential and risks are different from other major asset classes (like stocks and bonds).
• The tax implications of investing in real estate are different from those of publicly traded assets. It is always recommended to consult with a tax advisor when considering real estate investments.
• There are many different types of “asset classes” within real estate. Single-family homes are just the tip of the iceberg.

So, how can investors access real estate if they are just getting started in the sector? 

What if it was easy to invest in complex commercial real estate? Investors like Dr. Zaslau have carved out winning strategies for investing in real estate via platforms like EquityMultiple and tailoring their strategy to fit their overall investing mindset and lifestyle.

Real Estate Investing for Beginners: The Terms to Know

Real estate investing terminology can be intimidating. Which metrics and pieces of investing terminology do you need to know to get started? There are a couple pieces of good news on this front.

1. When you invest via a platform like EquityMultiple, you have an experienced team working on your behalf. You don’t have to negotiate with anyone, and you have a dedicated investor relations team in your corner, standing by to answer any questions you have. If there are terms you need to know for any particular investment, you can pick it up along the way.
2. There are a handful of terms you will see over and over again. This is not that long of a list.

Let’s take a few of the core real estate investing terms for investors who are newer to the asset class.

IRR (internal rate of return) — this is the most common return metric you will see for equity real estate investments. It is a time-weighted measure of return, meaning it captures the time value of money and factors in the timing of cash flows.

Cap rates (capitalization rates) — this is the ratio of net cash flow to fair market value of a property. Cap rates are key to understanding the potential return of an investment, and “going in” versus “exit” cap rates are key in determining the potential return from appreciation.

The capital stack — the financing of any one commercial real estate transaction typically has several layers. Hence, investments take on several structures across these layers, known as the “capital stack.”

Again, you will come across plenty more terms that may be unfamiliar as you begin your real estate investing journey. You may not know them all, and that’s OK. Feel free to reach out to ir@equitymultiple.com with any questions.

Passive CRE Investing vs. “Working in Real Estate”

Investing in real estate differs from working in the sector. As an investor, you’re committing your capital with the expectation of future profit, whether through property appreciation, rental income, or both. It’s a field that requires patience, as significant returns can take time to materialize.

As a passive real estate investor, you can access more types of real estate investing than ever before (as we will get into). Generally, you don’t need to have much in-depth knowledge of real estate to participate (via a platform like EquityMultiple, for example). However, there are a few basic dynamics in real estate investing to understand as you’re getting started. Knowing them can help you get comfortable with any given investment, and start to build a diversified portfolio of real estate assets that fits your overall strategy. 

Some things to brush up on as you are getting started:

• Risk factors — what types of risk any given real estate investment may entail, and how those risks may impact you as a passive investor.
• The hold period — if you are going beyond publicly traded REITs and investing in private-market real estate, be sure to understand how long your capital will be locked up for. If you are investing in a non-traded REIT or private fund, be sure to understand what redemption options you may have.
• Investor protections — what position are you in the capital stack, and hence what payment priority (if any) do you have?
• The promote structure — how will profits be distributed to you and other equity investors (if you are investing in real estate private equity).

These topics may seem daunting at first, but a bit of homework can position you to confidently enter the world of real estate investing. Be sure to ask questions early and often. EquityMultiple’s Investor Relations team is always standing by to answer questions — ir@equitymultiple.com.

A residential loan investment in Brooklyn, EquityMultiple’s most popular single-asset investment ever in terms of investor count. Thanks to low minimums, many less experienced investors are able to participate in this type of private-market transaction passively.

Starting with REITs

For those new to real estate, Real Estate Investment Trusts (REITs) offer a straightforward entry point. REITs are companies that own income-generating real estate and are known for paying out high dividends. They’re an excellent way for beginners to gain exposure to real estate without owning physical properties. Publicly traded REITs are accessible through brokerage firms and can be a smart addition to a diversified investment portfolio.

For instance, a beginner could invest in a REIT specializing in commercial real estate, which might include a portfolio of office buildings or shopping centers. This investment would allow the individual to earn dividends from the income these properties generate without having to manage the properties themselves.

To provide more specificity, let’s look at the historical performance of REITs. According to Nareit, the total annual return for U.S. equity REITs averaged 11.65% over the past 20 years, outperforming the S&P 500’s average of 9.83% during the same period. This data can help beginners understand the potential long-term benefits of including REITs in their investment portfolios.

Note that REITs (real estate investment trusts) come in several different flavors: publicly traded, unlisted, and private. Publicly traded REITs are the easiest to access for those starting out in real estate, but may correlated more closely with the stock market. Private REITs may offer some of the same diversification benefits while offering the non-correlated return thesis of an alternative asset. Check out our article on comparing REITs against private real estate to learn more.

EquityMultiple’s Ascent Income Fund is structured as a REIT, but offers the benefits of investing in private-market real estate assets.  

Online Real Estate Platforms

Platforms like EquityMultiple connect investors with real estate developers, offering opportunities to finance projects through debt or equity. These platforms are ideal for accredited investors looking to engage in real estate without the hands-on management of properties. This form of real estate investing for beginners is basically a tech-enabled version of the real estate syndication concept.

For example, an investor could use EquityMultiple to invest passively in real estate for as little as $5k, diversifying across a number of investments across a number of parameters:

• Real estate markets (geographically speaking) across the U.S.
• Income versus upside/total return potential 
• …Using real estate jargon, the “position in the capital stack”
• Property types, from multifamily to self-storage to industrial to a host of other niche CRE asset classes. 

EquityMultiple’s three pillars offer a range of return profiles, and hold periods ranging from just 3 months to years.  

In other words, passive real estate investing, even real estate investing for beginners, can now mean easily diversifying across a broad range of assets and return profiles. 

Within commercial real estate investing, there are numerous property types, or “subasset classes,” that carry different risk/return profiles. While a diversified portfolio will ultimately serve any investor best, certain types of CRE may be more appropriate for those who are just starting out in real estate investing. In the broader commercial real estate asset class, the following types may be particularly good places to start:

• Multifamily investing — the multifamily asset class may be a great place to start for a couple reasons. First, it’s easy to understand. The fundamental thesis — that all people need a place to live — drives a lot of the value, and newer investors may have an easier time getting comfortable with the particulars of a multifamily investment thesis. Second, the asset class tends to be among the most stable within commercial real estate, potentially offering investors a good way to balance risk.
• Core and core-plus properties — this type of commercial real estate tends to benefit from stabilized tenant bases, newer buildings, a strong neighborhood, or a combination of all three factors. For these reasons, core and core-plus properties tend to carry lower risk than opportunistic CRE investing.
• Commercial real estate debt — debt-based investments are typically secured by the underlying property, and hold payment priority over equity positions. These investments also typically carry a shorter hold period, hence liquidity risk. As such, CRE debt, or “private credit” tends to be a good option for investors starting out in real estate.

Multifamily is potentially a good option for investors starting out in private-market CRE investing.

Direct Property Investment

Purchasing rental properties is another avenue for real estate investment. The key is to find properties with expenses lower than potential rental income. For those not keen on the day-to-day responsibilities of being a landlord, property management companies can be a valuable resource.

For instance, a beginner investor might purchase a small apartment building, hire a property management company to handle day-to-day operations, and collect rental income each month. This approach requires more capital upfront but can lead to significant passive income over time.

To provide a concrete example, let’s consider a case study: John, a new investor, purchased a duplex for $250,000. After accounting for mortgage, taxes, insurance, and maintenance, his monthly expenses totaled $1,200. He was able to rent each unit for $800, bringing in $1,600 monthly and netting a positive cash flow of $400. Over time, as the property appreciates and the mortgage is paid down, John’s equity and cash flow increase, illustrating the potential of direct property investment.

Flipping Properties

House flipping involves buying underpriced homes in need of renovation and selling them for a profit. While popularized by television shows, flipping requires a deep understanding of renovation costs and market dynamics. Partnering with experienced contractors or investors can mitigate some of the risks involved.

A successful flip might involve purchasing a distressed property in an up-and-coming neighborhood, investing in renovations that add substantial value, and selling the home at a price that covers the purchase and renovation costs, plus a healthy profit margin.

To illustrate, consider a hypothetical story of Sarah, who flipped a property in a transitioning neighborhood. Let’s say she bought a fixer-upper for $150,000, invested $50,000 in renovations, and sold it for $250,000 six months later. After accounting for holding and selling costs, Sarah netted a profit of $30,000. This example demonstrates the potential returns from flipping but also highlights the need for market knowledge and renovation expertise.

Single-family home investing, or “flipping,” generally carries three traits that may make it a less-than-ideal means of real estate investing for beginners:

• Lack of diversification  — unless you have a very large amount of capital to deploy, you are likely only going to exposure yourself to one or a few single-family properties with just a handful of renters. This means your “vacancy risk” is quite high if a renter leaves and you can’t quickly fill the space. EquityMultiple, for example, offers the ability to potentially diversify across dozens of properties and hundreds of units/tenants for the same amount as a downpayment on a single SFH.
• Capital intensiveness — even if you are only going to invest in one property, you probably need enough not just for the downpayment, but also for closing costs, improvements, ongoing maintenance, and a host of other costs.  
• Time intensiveness — aside from managing the acquisition and eventual sale of one or more properties, you also need to commit to day-to-day management.

While “flipping” can be fulfilling and carry attractive return potential, other more passive forms of real estate investing may be better for those just starting out. 

Minimum Investment$20,000

Saint Cloud Multi-Bay Industrial

Target Hold Period3 Years

Investment TypeEquity

Target Net IRR(Log In to View)

Minimum Investment$5,000

Alpine Note Series - 3 Months

Term3 Months

Investment TypeShort-term Note

APY6.10%

Minimum Investment$15,000

Ascent Income Fund

RedemptionsAfter 1 Year Lockup

Asset TypeVarious

Security TypeSenior Debt

Minimum Investment$15,000

Life Storage - McAllen, TX

Target Hold Period3 Years

Investment Type Equity

Target Net IRR(Log In to View)

Minimum Investment$15,000

Upper Manhattan Mixed-Use Portfolio

Target Hold Period4 Years

Investment TypeEquity

Target Net IRR(Log In to View)

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Real Estate Investing for Beginners  — The Basic Toolbox

Successful real estate investing hinges on several key skills:

1. Understanding Real Estate Terminology: Familiarity with industry jargon is essential for effective communication and informed decision-making. Terms like “cap rate,” “cash flow,” and “loan-to-value ratio” are fundamental concepts that investors should understand.
2. Long-Term Planning: Real estate is typically a long-term investment, requiring thorough research and strategic planning. Investors should analyze market trends, property values, and rental rates to make informed decisions.
3. Asking Questions: No matter how you choose to invest in real estate, connecting with other investors and gaining insights and perspectives is invaluable. If you are investing passively, it’s about asking as many questions as you need to get comfortable with the investment you are consider, and the sponsor behind that investment. If you are investing more actively, networking is key. Building relationships with other investors and industry professionals can lead to opportunities and valuable insights. Joining real estate investment groups or attending industry events can be beneficial.
4. Education: Taking courses or earning certifications can deepen your understanding of the market and investment strategies. Many online and in-person resources are available to help beginners learn the ropes of real estate investing. Educating yourself is beneficial whether you want to engage in “hands-on” real estate investing (e.g. flipping houses) or passively via a platform like EquityMultiple

To further emphasize the importance of education, consider that according to the National Association of Realtors, over 90% of real estate investors say that education has been a critical factor in their success. This statistic highlights the value of continuous learning and staying informed about the latest industry trends and regulations.

Again, investors who are just starting out in real estate may want to “outsource” this skillset, investing passively alongside professional real estate investors. 

Know your reasons: Your objectives for real estate investing may impact your risk tolerance and timeline. This is the current breakdown of “reasons for investing in real estate” among EquityMultiple investors.

Is Real Estate Investing Right for You Right Now?

In 2025 and beyond, real estate investment remains an attractive option for those seeking to diversify their portfolios and build long-term wealth. While public markets have enjoyed a reasonably strong period, the stock market may not be a robust driver of total return in the next phase of the cycle. As we have argued, passive investments in both real estate private credit and real estate private equity may help investors diversify for both income and appreciation. The key is to align your investment strategy with your financial goals and risk tolerance. With careful planning and a willingness to learn, real estate can offer substantial rewards.

Be realistic with your level of knowledge, but do not be afraid to ask questions. Consider whether more “hands-on” forms of real estate investing may be suitable for you, or whether a more passive and/or diversified approach could be a good place to start. 

When getting started in real estate investing, it helps to have a trusted guide.

Real Estate Investing for Beginners — the Bottom Line

Real estate investing offers a path to financial growth and portfolio diversification. For beginners, starting with REITs or online platforms can provide a foundation for understanding the market. Direct property investment, flipping, and offline syndications are more hands-on approaches that require a deeper commitment but can yield higher returns. Regardless of the strategy, success in real estate investing requires knowledge, planning, and the right skills. For accredited investors looking to diversify into the asset class, investing via an online platform could be the lowest barrier to entry, and potentially offer some of the most appealing risk-adjusted returns.

Ready to embark on your real estate investment journey? EquityMultiple is here to guide you through every step, offering a platform that simplifies the process and connects you with vetted opportunities. Start building your real estate portfolio today and unlock the potential for long-term wealth.

FAQs from New Real Estate Investors

Is real estate investing suitable for beginners?

A: Yes, with proper research, education, and strategic planning, beginners can successfully invest in real estate. However, every real estate investment entails risk, and it is critical to understand these risks, ask questions, and get comfortable with the dynamics of the investment. Investing passively and fractionally in a diverse range of real estate investments can potentially help you balance risk.

Is real estate investing a good way to build wealth?

A: Yes, real estate investing can be a powerful way to build wealth, as it offers potential for passive income, appreciation, and tax benefits. Like any other asset class, real estate investing entails risk, which should be carefully considered.

How much money do I need to start investing in real estate?

A: The amount required can vary widely depending on the investment strategy. REITs can be a low-cost entry point, while direct property investment typically requires more capital. EquityMultiple’s investment offerings start at $5,000.

Can I invest in real estate if I don’t want to be a landlord?

A: Absolutely. Options like REITs and online real estate platforms allow you to invest without the responsibilities of property management. This is known as “passive real estate investing.”

Is flipping houses still profitable?

A: Flipping can be profitable, but it requires a thorough understanding of renovation costs and market trends. It’s also riskier and more capital-intensive than other strategies.

How can I learn more about real estate investing?

A: Consider taking courses, reading books on real estate investing, and networking with experienced investors to gain knowledge and insights.

I want to get started—which real estate investment is right for me?

A: While EquityMultiple can’t make specific recommendations, we do encourage investors to diversify as much as possible with their real estate allocation. Within the EquityMultiple platform, for example, this may entail investing the minimum in several opportunities across our three pillars.

What are the risks of real estate investing?

A: Like any investment, real estate comes with risks, including market fluctuations, property management challenges, and potential for financial loss. However, with a strategic approach, these risks can be managed and mitigated. Refer to this article on systematic risk, or this article on idiosyncratic risk, to get more perspective on the risk of real estate investments vs. those of other asset classes.

Can I invest in real estate if I have a full-time job?

A: Absolutely. Many real estate investment options, such as real estate crowdfunding (through an online platform like EquityMultiple), REITs, or using property management services for rental properties are compatible with maintaining a full-time job.