Ask any professional investor, and nearly all will agree: Real estate is a great way to build wealth over time, making it one of the most valuable asset classes in any portfolio. In fact, 41% of Americans surveyed in 2021 said “real estate is the best long-term investment.”
But real estate investing is challenging, requiring education, networking, knowledge, and experience.
Many investors new to the world of real estate start with part-time investing before jumping in with both feet. Part-time investing is a great way to test the waters and generate a supplemental income while keeping a full-time job and building a base of knowledge, experience, and contacts.
More than 44% of Americans work a side job to supplement their full-time work. Can part-time real estate investing be a worthwhile side hustle?
With the right strategies and mindset, absolutely.
Know Your Options
Many real estate side-hustles call for more hustle than money, making them an ideal place to start for new investors. Other options do require an outlay of cash and may require working with a lender, but can yield higher returns over time.
There are advantages to owning and managing rental properties, whether a multi-family home in which you live in one unit and rent out the others or a single-family home or vacation house. These investments can generate supplemental income, will typically appreciate over time, and provide a number of tax benefits.
On the other hand, buying rental properties requires a significant outlay of cash, regular investment of time and skills to manage tenants and the property itself, and the possibility of vacancies.
Before deciding if rental properties are the right choice for you, you might consider overseeing other investors’ properties to learn the ins and outs of tenant management, property maintenance, and marketing.
House-flipping, or buying an undervalued home to renovate and sell for profit, is an option for experienced investors who have the knowledge, cash and expertise to either oversee the renovation or the time and money to do the work themselves. House-flipping can yield high returns in a shorter amount of time but runs the risk of becoming a loss if an investor isn’t able to easily sell a property, though working with an iBuyer such as Opendoor is always an option.
When it comes to selling properties such as a recently renovated house, investors in most states throughout the U.S. — from Main to Arizona — can benefit from using a 1031 exchange, in which capital gains are deferred when proceeds from one investment property are reinvested into another.
REITs (real estate investment trusts) and real estate crowdfunding are two options for investors who want exposure to real estate without the hands-on commitment of buying, renting, or flipping property.
REITs allow investors to purchase shares of a portfolio of income-producing properties owned and managed by the trust. The holdings often include shopping malls, apartment complexes, office buildings, resorts, warehouses, or other large-scale properties that might be out of reach for an individual investor.
Publicly traded REITs are listed on the major exchanges and are registered with the SEC. Like other stocks, REITs provide dividends and must payout 90% of its taxable profits in order to maintain its REIT standing.
Similar to REITs, real estate crowdfunding allows investors to pool their funds to purchase shares in a portfolio of commercial and residential assets, and in some cases even income-producing farmland, through an online platform. You’re typically able to easily monitor your investment through online tools, and returns can be competitive.
Many online platforms have a low minimum investment, which makes a starter portfolio within reach for most beginning investors. Like any investment, crowdfunding has its risks and may be subject to management fees and other restrictions.
Find a Partner
For a part-time investor, working with a partner has its advantages. Splitting the financial load can help fund your investments as well as reduce your risk. And sharing the hours needed to launch a part-time business with a partner will grow the business faster and more efficiently as will dividing the labor based on your individual strengths and skillsets. You might try working with a part-time realtor, someone who understands the industry.
Real estate investing requires knowledge and know-how. Partnering with an experienced mentor will not only up your investment skill but will keep you accountable and motivated.
Assemble Your Team
A network of reputable and reliable contacts is one of your most valuable assets as a real estate investor, particularly if those contacts have years of knowledge and experience and are willing to share. The most valuable advice you’ll receive is that of a trusted mentor who wants to see you succeed.
Part of your network should include a good accountant to manage the taxes associated with your real estate business. Also connect with a solid contractor for repairs and maintenance, property managers you can count on, and an experienced realtor (who is well worth the commission) to help you navigate the market, whether you’re buying or selling.
Automate Your Process
Any new venture is a lot of work, and real estate investing is no different. Efficiency is the key to prevent burnout from balancing a full-time job and personal life with a part-time side hustle. Your time is your most valuable asset, and anything that frees up more of it is a good thing.
Automate or outsource the tasks you can, and adopt this mantra: Just because you can do something yourself, doesn’t mean you should.
Consider these options for automating or outsourcing various business functions:
- Use a call-forwarding app or an answering service to manage incoming calls, and auto-responders for incoming emails (Remember to respond!). You can also use auto-dialing software if you plan to make a lot of cold calls.
- Market your business with email drip campaigns and email blasts
- Engage a freelancer to maintain your website, blog, and social media accounts
- Use accounting software to keep track of your expenses and finances (and make things easy for your accountant at tax time)
- A virtual assistant to keep things behind the scene running smoothly
The Pareto principle or “The 80/20 Rule” says 80% of results come from 20% of the effort. In other words, ask yourself “which 20% of my actions are causing 80% of the effect”? Use the most effective 20% of your marketing, sales, and productivity to drive your business forward.
Don’t Stop Learning
Knowledge is power, and you need a lot of it to get started in real estate investing, even part-time. Keep current with seminars, training courses, or online classes. Use your downtime to listen to real estate podcasts you enjoy, read or listen to books on investing, and subscribe to association newsletters. Glean everything you can from reputable sources of information to build your knowledge base.
You might even consider selling real estate part-time as a way to really immerse yourself in the ins and outs of the business.
Successfully investing in real estate while still maintaining a full-time job takes discipline, knowledge, and a thoughtful plan. Using your time and resources efficiently and to maximum effect is a solid means of getting there.