Real estate investors are people who invest in real estate—which is the transactional sale or acquisition of real property—to generate cash flow. Real estate is a tangible asset class that can reliably appreciate over time, although it is often low-liquid and takes a while to sell. Investment properties can be active or passive. \n\nActive real estate investment involves purchasing and managing an investment property or investment properties. This can include renting an investment property (like a single-family home), flipping a house, or acquiring a rental property and managing it. Passive real estate investment involves investing money in real estate partnerships or trusts to generate cash flow without managing the development, renovation, or operations of the properties. \n\nDifferent types of real estate investments will yield different profits depending on the following considerations. \n\n1. __Location__: Property values in the real estate business are often based on location. A small lot near essential amenities like public transportation will likely be more valuable than a large parcel of rural land. A lot near an airport or freeway may be worth less than one in a quieter residential area. Observe the neighborhood and market trends to find areas with high growth potential when you’re looking to invest in real estate. \n2. __Short-term vs. long-term investments__: Decide whether you want to embark on a short-term investment (which can become liquid in a short period of time) or a long-term investment (which can become liquid over a longer period of time). If you want to focus on short-term projects, consider becoming a wholesaler for fix and flip properties that you can turn and sell for a quick but small profit. Wholesaling is when the investor assesses a property’s market value and repair costs, then hires a third party to serve as the ‘flipper’ to make improvements and turn a profit. Conversely, you can use residential property or commercial real estate for long-term buying and leasing, which can help you generate cash flow and build income over time. \n3. __Capital__: Your investments will be limited by the amount of money you can spend. You may be tempted to invest in a cheap vacant lot in a great location, but you will also have to consider the cost of building a structure on that land. For beginning investors, it may be a wiser choice to invest in an existing property to lower the potential financial risk. \n4. __Time investment__: Consider the amount of time and effort you are able to devote to the development, management, and operation of your property investment. Active properties like residential complexes and flips can involve a great deal of time and effort in tenant management and project management. Passive opportunities like investing in Real Estate Investment Trusts (REITs) or Real Estate Investment Groups may be better if you’re a novice investor who wants to learn about the market without doing the hands-on work of renovating, developing, and managing a property. \n\nHere is an overview of how you can become a real estate investor. \n\n1. __Learn about real estate__. As a new investor, learning the basics of real estate is the first step in understanding the best way to conduct your investments. Consider taking a few real estate classes so you can learn the ins and outs of the real estate industry. This can set you up to find the right investment opportunities, and avoid wasting money on less promising endeavors. \n2. __Make a business plan__. Developing a real estate investment strategy can help you invest your money wisely. Have a general idea of the kind of investments you want to make, what working capital you have to invest, and what you expect your profit to be. Decide if you’ll be making any high-risk investments and layout your finances accordingly. Decide whether you want to take an active or passive approach to your real estate strategy. If necessary, consult with an advisor to see where your money would be best suited for your type of investment. \n3. __Do your due diligence with the local market__. Pay special attention to the housing market forecasts and stay up to date on all the latest news regarding real estate investments. If you’re investing in residential real estate, study the up-and-coming neighborhoods, what is for sale, and what isn’t selling. Pay attention to what renters are leasing, where, and when. If you’re investing in [commercial real estate](https://www.masterclass.com/articles/what-is-commercial-real-estate) like residential apartment complexes or storefronts, consider the foot traffic of an area and the neighborhood profile. Stay abreast of all the latest laws and regulations with real estate development, like zoning, property taxes, and availability. \n4. __Talk to other investors__. Networking with other experienced investors can educate you on the best methods or procedures for your real estate investing strategy. Successful investors may be able to give you handy tips for property management or building investment. They can also offer helpful advice on diversifying your real estate portfolio. Furthermore, you might meet some potential partners for future investment endeavors. \n5. __Consider passive real estate investment__. There are many opportunities to invest your money in real estate similarly to how you would in the stock market—by purchasing a share of a pool of investments and allowing your equity to grow in value. Real estate investment trusts (or REITs) are companies that own and operate real estate, and if they are publicly traded civilians can invest in them for passive income. Real estate mutual funds are another opportunity for investors to contribute money to a group of real estate investments determined to have good prospects by experts. Wealthy entrepreneurs will also sometimes turn to crowd-funding to finance a series of real estate investments while hiring others to manage the logistics of the property or properties. \n\nAll investments, including real estate investments, come with inherent risks which may involve the depreciation of assets, financial losses, or legal ramifications. The information presented in this article is for educational, informational, and referential purposes only. Consult a licensed real estate or financial professional before making any legal or financial commitments.\n\nAll you need is a [MasterClass Annual Membership](https://www.masterclass.com) and our exclusive video lessons from prolific entrepreneur Robert Reffkin, the founder and CEO of the real estate technology company Compass. With Robert’s help, you’ll learn all about the intricacies of buying a home, from securing a mortgage to hiring an agent to tips for putting your own place on the market. \nReal estate investing can be an effective way to increase your net worth and achieve financial freedom.