Real estate investing is a broad term that covers many different kinds of investments. For the most part, investments will fall either under residential real estate or commercial real estate. Residential real estate ranges from small plots of land to condos, townhouses, single-family homes, and small multi-family units. On the other hand, major commercial real estate categories would include commercial land and multi-family (5+ units), office, retail, and industrial buildings.

The categories above are quite different from each other and each requires different levels of capital and expertise. For the typical investor, the first real estate investment that is made is the purchase of one’s own home. The next most common real estate investment is to buy another single residential unit be it a condo unit, townhouse, or house to rent out to an individual or family.

Owning your own home: For many people, owning your own home is one of the biggest investments that you’ll make. Let’s tackle how much money you’ll need to purchase your first home. One of the biggest obstacles to home ownership is the down payment. First time home buyers may be able to take advantage of a government-insured FHA loan which will require you to put up a 3% down payment plus some closing costs. To qualify for a conventional mortgage, lenders will require around a 20% down payment. That’s quite a lot of people for most people even at today’s values. Luckily, many lenders will still give you a loan with you putting down as little as 5%. However, you will be required to purchase PMI (private mortgage insurance. This is a recurring monthly payment that you’ll have to pay until your equity in your home reaches over 20%. The less money you put down, the great risk you are to default on your loan in the lender’s eyes.

So much will depend on the current state of the real estate market. The amount of money available on the credit market for consumers to borrow will vary. The nature of the market will define the lending requirements. Aside from the down payment, another important factor that will affect you is the interest rate. This also depends on a lot of different variables. You can think of the interest rate as the cost of borrowing money. The higher the interest rate, the more you will have to pay in your monthly payments.