Investing 101: A primer for real estate beginners

Investing in real estate is a popular strategy for growing wealth. Adding real estate investments to your portfolio can add diversification and help protect your wealth from the volatility of the stock market.

A few options exist for getting started as a real estate investor. Depending on resources and personal interest, you can find the choice that best suits your financial strategy. Here are three accessible types of real estate investing:

Rental properties: To become a direct owner in real estate, find a home, condo or apartment building, buy it and then rent it out. Before becoming a landlord, you'll need to amass a down payment, undergo property inspections and review the property's rental potential and expense records.

Benefits of real estate investing include the opportunity for steady cash flows and capital appreciation, along with tax benefits. However, it takes due diligence to uncover a suitable rental property selling at the right price. The rental property's expenses, such as repairs and maintenance, shouldn't be greater than your rental income, or you'll be losing money instead of making it.

If you go this route, find a real estate agent who deals in rental properties and start viewing properties. Be prepared to evaluate financial records. Do the math to ensure your rental property will provide a good return on your investment.

Real estate investment trusts: Real estate investment trusts own or finance income-producing real estate. REITs buy many properties, including apartments, hospitals, hotels, industrial facilities, office buildings and mortgages, then sell ownership shares to individual investors.

REIT investors enjoy many of the same benefits as direct real estate investors. REITs must pay out at least 90 percent of its taxable income to shareholders annually. REIT returns outpace the consumer price index, according to www.reit.com, making REITs a good inflation hedge.

REIT funds might increase in value, but positive returns aren't guaranteed. Buy during a housing bubble, and when real estate prices return to normal, your REIT might drop in value.

You can invest in a REIT as easily a mutual or exchange-traded fund. Sign into your investment brokerage account, punch in the fund ticker symbol, choose the number of shares and click "buy."

Home rentals: With the advent of the sharing economy and websites such as Airbnb, ordinary individuals can become landlords. Renting your property through the sharing economy requires a serious commitment, financial outlay, appropriate insurance and ongoing management.

The benefits of renting a part of your home include extra cash and the opportunity to meet interesting, new people. You'll need to prepare the site for the visitor, manage the listing, be available for questions and concerns and clean regularly.

To become a host, visit the Airbnb website.

After you decide that you want to take to become a real estate investor, follow these general steps:

*Determine how much time and money you want to spend on this type of investment.

*Set your real estate investment budget: $1,000 to $3,000 for fund investors, up to five figures for direct real estate investors.

*Do your research. Find out which investment options are available to you.

*Choose the real estate investment option that fits with your financial and time availability. Less time and money is required for REIT investing, whereas greater outlays are required for direct investing.

*Save up a cash cushion, as investment-related expenses will crop up. Direct real estate investors will need a larger cash cushion than Airbnb hosts.

* Be prepared for setbacks. Like any other financial endeavor, you're likely to experience challenges. But if you do your homework first, you'll be prepared.

Credit: By Barbara Friedberg - GOBankingRates.com

Caption: Adding real estate investments to a portfolio provides diversification and protection against market volatility.; erhui1979/Getty