Over the last 50 years, real estate has been a popular investment option for many investors. Today we will tell you how to invest in real estate in five simple ways. So, what exactly constitutes a good real estate investment? Well, a good investment has a high likelihood of success or return on investment (ROI). Besides that, if your investment carries a high degree of risk, the risk should be more than offset by the potential reward. Even if you select investments with a high chance of success, there is no guarantee of success. Thus you should not invest in real estate if you cannot afford to lose it.
However, when you think of real estate, the first thing that comes to mind is your home. But did you know that in today’s market, there are more options for real estate investors? In fact, you don’t even need to own real estate to qualify as one. Do you want to know what other options exist? In this article, we will go through the best of them to know how to invest in real estate in five straightforward ways.
1-Purchasing Rental Properties
One way to invest in the real estate market is to own rental properties. In fact, you can buy a unit or several units, make the necessary renovations and then begin renting them out. You can manage the project directly if you are a hands-on person. If not, you can also hire someone to manage the project for you. It is crucial to keep in mind that both these renovations and property upkeep require sizable amounts of capital. In addition, unless you’re willing to be the sole manager of the property, you may need to hire a property manager for regular maintenance and upkeep. Here are some advantages of selecting this option.
● Provides consistent income and property appreciation.
● Maximizes capital through leverage.
● Many associated expenses are tax deductible.
2-Investing in REIGs
Do you want to own rental properties without the hassle of managing them? Then REIGs are an excellent way to learn how to invest in real estate. REIGs function similarly to mutual funds. A company will buy or build apartment buildings or condos and then sell them to investors. Additionally, it is important to note that in order to invest in a REIG, you must have a capital cushion as well as access to financing. You can own one or more units as an investor. While you own the unit(s), the company that runs the investment group is in charge of handling maintenance, accepting new tenants and advertising for vacancies. In exchange for these services, the company will collect a percentage of the monthly rent from each unit owner.
When it comes to REIGs, one significant advantage is that you will still receive income even if your unit is empty or unoccupied. This is because a portion of the rent is usually set aside in case of unexpected vacancies. Some benefits are:
● More hands-off than owning rental properties.
● Income and capital appreciation.
3-Home Flipping
House flipping means buying a house, making improvements to it and then reselling it for a profit. Not to mention, it is a good investment strategy for people who have a lot of experience with renovation, sales and marketing or real estate valuation. If this is a new territory for you, you can also hire a professional to rightly guide you.
When it comes to flipping houses/property, there are two approaches:
1. Purchasing a property whose value you anticipate increasing, renovating it and then selling it for a profit.
2. Buying a property in a rapidly rising market, holding it for a few months and then selling it for a profit.
If you want to start house flipping, you must know that:
● House flipping can provide excellent returns in a short period of time.
● Your capital is only restricted for a limited time.
4-Investing In REITs
Real estate investment trusts or REITs, are businesses or corporations that operate similarly to mutual funds. They buy and operate income-generating real estate with money from multiple investors. REIT-owned commercial real estate may include shopping malls, apartment buildings, hotels and office buildings. Like regular stocks, REITs trade on well-known stock exchanges. Therefore, individual investors can earn profits from the real estate market without actually owning or managing any property. This indeed makes it one of the top reasons why real estate is a good investment.
REITs are a popular investment because they pay high dividends. Thus are indeed a popular retirement investment as well. Likewise, if you’re an investor who doesn’t want to receive regular dividends, you can reinvest the money to help your investments grow even more. Some pros are:
● Investors receive regular payments known as dividends.
● It’s a hassle-free investment because you don’t have to manage any properties directly.
5-Investing On Online Real Estate Platforms
Platforms for real estate investing are for people who want to pool their money with others to invest in a larger commercial or residential deal. The money is invested through online real estate investment sites, also known as real estate crowdfunding. This still necessitates investment capital, albeit less than that required to buy properties outright.
Online marketplaces bring together project financiers and real estate developers. In some cases, diversifying your investments only requires a small amount of money. Here are some benefits of choosing these options.
● You can choose to invest in one or more projects.
● You can invest in a property at any specific geographical location you want.
The Bottom Line
Real estate can be a profitable investment, but it is critical to understand what works best for you. You can make a decision based on how much money you want to invest, the type of liquidity you want, the consistency of your cash flow and your risk tolerance. Owning, renting out and flipping real estate all require sizable financial commitments, experience and a solid grasp of the regional real estate market. Additional responsibilities include looking for tenants, buyers and maintaining assets.
Apart from that, mutual funds and exchange-traded funds (ETFs) are the best options for investors who prefer to make regular, small investments as opposed to large ones all at once. However, there is no steady flow of cash and the liquidity based on the share price at redemption. If done properly, real estate investing can be profitable. Also, it is an excellent means of diversifying your investment portfolio. If you want to get into real estate investing, do your own research and consult a financial expert.
We hope and believe that our blog on how to invest in real estate will prove beneficial for you. For additional property-related articles and blogs, keep checking out our website. ProEdge Property management is a leading real estate firm in the country. We strive to provide the best services possible to all of our valued clients. We already have thousands of satisfied and happy customers to our name which itself speaks volumes about the quality of our services. When it comes to property management, we put your mind at ease by guaranteeing proper upkeep of your property. Our expert team has extensive market knowledge and experience. It ultimately allows you to unwind and gives you a lot of confidence in your properties.
