5 Different Ways To Invest In Real Estate

Ravindra Ambegaonkar
September 27, 2022
4 Minutes Read
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KEY TAKEAWAYS

- In terms of investing, real estate is a sound option and an excellent way to diversify your portfolio. Its long-term investment is hard to argue with, as it can improve your investment returns over the long haul.

- Also, you’re not limited in your real estate investment options. As you can see, there are numerous ways to start investing in real estate. All you have to do is choose which one suits you best to start investing today.

Smart investors know that diversification is key to a sound financial plan. So, while traditional investment portfolios often consist of stocks, you should consider expanding your investment horizon. In this case, real estate investment can be both lucrative and satisfying.

Real estate investing is quite popular, now more than ever, thanks to the low mortgage rates. This makes it more affordable to jump into the real estate investing bandwagon. And contrary to popular belief, dipping your toe into the real estate industry is more than just becoming a landlord.

Investors have a variety of ways to invest in real estate. The best thing is that there’s a way to invest in real estate that can work for anybody, especially if you don’t have lots of funds to invest right now.

This article will discuss several ways to start investing in real estate now.

1) Invest In Rental Properties

Rental properties are the first investment option that most people think about when talking about real estate investment. After all, it’s the most common and time-tested investment strategy in the real estate industry.

Owning rental properties can be a good opportunity for individuals with DIY renovation skills and the patience to find and manage tenants. It can offer you a steady cash flow and the possibility of appreciation in the long term.

You can rent a property for the long-term or short-term. Long-terms are designed to be rented for months to years, providing a steady monthly cash flow. Short-term rentals are often vacation properties that you can rent out per night or for a week.

That said, rentals are one of the most labor-intensive strategies of real estate investing and often require significant capital to finance maintenance costs and pay for the vacant months.

2) Flipping Properties

Buying and flipping properties is a common real estate investment strategy. However, like a landlord, becoming a home flipper takes a lot of work.

Property flipping means buying a property, renovating it, and selling it at a premium. Home flipping also requires you to learn and identify promising neighborhoods that allow you to sell the properties at a higher price. If your property flipping strategy involves construction and renovation, you’ll need to shell out thousands of dollars for remodeling and renovation costs. Also, you’ll need to do a lot of marketing to sell the property.

If you want to minimize the needed effort, consider looking for properties that don’t require significant renovations. To maximize your investment, you can even rent out the property for a short time while waiting for its value to rise. You can also use software that automates most of the work, such as building a buyer’s list and marketing to them. To learn more about this software, go now and check it online.

3) Try Real Estate Investment Trusts (REITs)

If you want to invest in real estate but have limited funds, you can try real estate investment trusts (REITs). Think of REITs as stocks for real estate, allowing you to invest in real estate without physical property.

These are public companies that raise funds by issuing bonds and selling shares of stocks. The proceeds are then used to purchase and rent real estate assets like retail spaces, warehouses, office buildings, hotels, and apartments.

REITs are known to pay high dividends from all their after-tax profits, making them a common investment for retirement. If you don’t need a regular income, you can automatically reinvest your dividends to grow your investment further.

In general, REITs take the stress out of owning physical property. You simply sit back and collect your dividends. REITs are also the most liquid real estate investment option since you can easily buy and sell your shares of REIT stock in the market via your regular brokerage account if they offer it.

You can also get a more diversified selection by buying into a fund interested in numerous REITs. You can do this by investing in a mutual fund that holds shares of several REITs or via an exchange-traded fund (ETF).

4) Real Estate Crowdfunding

Another way to start with real estate investing with a small fund is crowdfunding. This strategy allows an organization to raise capital from donations. It’s typically done via online platforms that serve as a marketplace between interested investors and real estate developers.

Investors will receive equity in a real estate development project in quarterly or monthly distributions in exchange for the funds donated. However, note that some real estate crowdfunding platforms may not be available for everyone. Some platforms are reserved for qualified investors who are often highly experienced and/or high net-worth individuals.

Also, real estate crowdfunding often comes with considerable risk. Since they are private investments, they are not as liquid as REITs and other publicly traded securities. In short, your funds will be tied up over the long term.

5) Join A Real Estate Investment Group

A real estate investment group (REIG) is suitable for investors who wish to own rental real estate but without the hassles of managing it. Think of REIGs as small mutual funds investing in rental properties. In a typical REIG, the company builds or buys a set of apartments or condos. You will have to purchase these properties through the company, thus becoming a group member.

You can own one or several units, but the company will manage them, including advertising, maintenance, and tenant management. The group will take a percentage from the monthly rate in exchange for their work.

A standard REIG lease is in your name. Also, all units pool a specific portion of the rent for security against vacancies. Thus, you’ll still receive an income even if the unit is empty, as long as the vacancy rate doesn’t spike too high. However, like rental properties, joining an REIG will necessitate substantial funding and a capital cushion.

Tags real estate real estate development

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