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Real Estate Guide: Buying, Selling, and Investing

Real Estate Basics for Buyers, Sellers, and Investors

Real estate presents a variety of opportunities for people to invest their money in a new house, cash in on their existing land, or invest in rental properties to bring in monthly revenue. Not only are there many different types of real estate, but there are many steps involved in buying or selling real estate and investment strategies. Knowing the basics can help you navigate big financial decisions with ease.

What Is Real Estate?

Real estate is land and everything permanently attached to it, including structures and natural resources. In addition to physical components, real estate includes the rights associated with it—how it's used, sold, leased, built upon, and more.

Types of Real Estate

There are four main types of real estate: residential, commercial, industrial, and land. The main way they differ is how the land is used.

Residential real estate: Property used for housing, such as single-family homes, townhouses, apartments, condos, and multi-family buildings
Commercial real estate: Property used for business purposes, such as office buildings, retail stores, hotels, and restaurants
Industrial real estate: Property used for manufacturing, production, distribution, and storage, such as factories, warehouses, and logistics centers
Land real estate: Property that's undeveloped or vacant, such as agricultural land or land set aside for future development projects

You may also hear about special-purpose real estate, which is property designated for public use, such as cemeteries, libraries, parks, schools, churches, and more.

Buying Real Estate

One of the most common types of investments people make is in a home. When it comes to buying a house, you'll need to consider credit health, location, the type of home you want, how much you're comfortable paying each month on a mortgage, and other factors. Here's what the process could look like for you:

Review your current financial health, including your credit score, monthly income, monthly debt payments, and ability to take on a mortgage payment.
Establish a budget and get a feel for how much home you can afford.
Save for a down payment, if the home loan you're applying for requires one.
Get prequalified for a mortgage to get a better understanding of your approval odds as well as how much you'll be approved for.
Find a real estate agent to help you view available homes and negotiate on your behalf.
Start looking for homes by searching online and attending open houses. Begin narrowing down your options.
Submit an offer on the property you love and want to move forward with, negotiating as needed.
Complete your mortgage application and finalize your loan.
Get a professional home inspection to ensure there aren't any major issues you're unaware of.
Review the updated home appraisal to understand the property's market value.
Close on your home, pay any closing costs, and celebrate being a new homeowner.

If you're ready to become a homeowner or move into your next house, consider your options and learn how Freedom Mortgage can help. From conventional fixed-rate loans to VA loans designed to support veterans, active-duty service members, and their families, we can help make your homeownership dreams come true.

Selling Real Estate

Selling real estate also has several key steps that allow you to transfer ownership to a new party. Here's what the process could look like:

Prepare the area for showings by clearing out personal items, cleaning up the space, making any necessary repairs, and making your home as appealing as possible for potential buyers.
Consider making updates, such as installing a fence or painting the walls with a fresh, neutral color to boost its value.
Choose a listing agent who can confidently communicate the value of your home and advocate on your behalf.
Determine an asking price based on comparable properties that have sold in your area and your home's current market value.
Create your listing, ideally with the help of an agent, to show buyers key areas of your home and property.
Coordinate viewings with your agent so prospective buyers can view your home privately and determine if it's a good fit.
Review any offers you receive and decide which one you'd like to go with. At this stage, you may consider negotiating.
Finalize the deal and close on the sale with the support of your agent. You'll likely also want a real estate attorney to ensure a strong contract, appropriate documentation, and smooth transfer of ownership.

If you're in the process of buying and selling, explore how Freedom Homes can help with qualified real estate agents and the potential for savings.

Investing in Real Estate

Real estate investment is when you buy, own, manage, rent, or sell real estate with the goal of generating a profit. In many cases, this involves getting a mortgage. For some people, investing in real estate is a strategy for building long-term wealth, which you can do actively or passively.

Active real estate investing is when you're directly involved with buying, managing, and improving property. Passive real estate investing is when you're not directly involved with specific properties but instead rely on external parties for management and operations.

Types of Real Estate Investments

There are a few common ways you can invest in real estate, each with its own strategy and key considerations:

Investment Type	Strategy	Key Considerations
Residential Rental Property	Buy and rent out homes, apartments, townhouses, or other residential spaces.	Property management and maintenance necessary Must support tenants Potential visits to property (even if long-distance)
Commercial Property	Purchase and lease spaces used for business, such as office buildings, retail spaces, or shopping centers.	Tend to have longer leases Higher upfront costs Vulnerability to the economy
Industrial Property	Invest in warehouses, distribution centers, or manufacturing facilities that support logistics and supply chains.	Tend to have long-term leases Can be harder to find qualified tenants for Usually needs to be near a transportation hub
Real Estate Investment Trusts (REITs)	Buy shares in publicly traded companies that own and manage real estate portfolios intended to produce income.	Highly liquid Subject to unpredictable market Don't require property management
Land Investment	Acquire undeveloped or vacant land to sell later at a higher value or develop in the future.	Risk of zoning issues No cash flow Opportunity to grow value (and wealth) over time
Real Estate Crowdfunding	Contribute money alongside other investors to fund a real estate project like a renovation, development, or new-income property.	Investment ties up funds for a long time Can be difficult to sell your share Is subject to the crowdfunding platform's performance Has minimum investment requirements
Fix and Flip	Buy, renovate, and quickly resell a property at a higher value to acquire a profit.	Can be a high risk Success depends on market timing Requires an investment in renovation costs and time
Vacation Rentals	Purchase and manage short-term rental properties that travelers can use, including properties through platforms like Airbnb and Vrbo.	Subject to seasonality Has special regulations Requires active management

Real Estate FAQs

Interested in learning more about real estate? Here are some answers to common questions:

What Is the 30/30/3 Rule for Homebuying?

You may have heard of the 30/30/3 rule when buying real estate. This strategy is meant to help you buy a home that's affordable based on your current financial situation. According to the 30/30/3 homebuying rule:

You shouldn't spend more than 30% of your gross monthly income on a monthly mortgage payment.
You should save at least 30% of the home's value for a down payment and cash buffer.
You shouldn't buy a home that costs more than three times your gross annual income.

What Are the 4 ‘Ps' for Selling Real Estate?

Real estate sales can leverage the four "Ps" as a strategy for success when selling a property:

Place/People: Who you're putting the listing in front of or where you're meeting potential buyers
Price: The asking price, based on current market value and comparable property sales
Promotion: Marketing efforts to promote the property, such as ads and open houses
Product: The property itself, including its condition and features

What Is the 70% Rule in Real Estate Investing?

Many real estate investors follow the 70% rule, which suggests you pay no more than 70% of the home's value after making repairs or updates. In other words, you should pay a maximum of 70% of the property's "After Repair Value" (ARV)—minus the cost of repairs. For example, if a property's estimated ARV is $100,000 and the property requires $20,000 in repairs, the 70% rule would suggest you pay no more than $50,000.

What Is the 2% Rule in Real Estate?

The 2% rule in real estate is meant to help investors determine if a rental property has the potential to generate valuable cash flow. This rule suggests that rental investors should generate a monthly income worth at least 2% of the property's purchase price. For example, if you purchase a rental property for $100,000, you should bring in at least $2,000 in monthly rent to be profitable and make your investment worth the risk.

A Summary of Real Estate Basics for Buyers, Sellers, and Investors

Real estate can be a powerful tool for investing your money into a new home, making money off of your current property, or generating income with a strong investment strategy. By understanding the ins and outs, you can make big real estate decisions with more confidence. Keep in mind: You don't have to navigate the real estate industry alone. Freedom Mortgage is here to help with resources for financing and selling.

Freedom Mortgage Corporation is not a financial advisor. The ideas outlined above are for informational purposes only, are not intended as investment or financial advice, and should not be construed as such. Consult a financial advisor before making important personal financial decisions, and consult a tax advisor regarding tax implications and the deductibility of mortgage interest and charges.