Do you want to invest in real estate? Have you been thinking about it for a long time but have yet to act? What is stopping you? Some common reasons why aspiring real estate investors postpone their ambitions include:
- They don’t have much cash on hand to put down.
- They don’t want to fix toilets or deal with annoying tenants.
- They hear owning property is risky and fear losing money.
- They don’t think they will have time to manage a rental property.
- They don’t want to have to interview people in order to find tenants for the property.
The fundamental problem with these justifications is that they are based on a skewed understanding of real estate investing. Most people think of property investing in terms of being a landlord; however, while this is the most common way to invest in real estate, it is not the only way. The real estate industry is vast, and there are other ways to invest in homes apart from being a landlord. Some of these approaches do not require direct property ownership. Some options even allow you to invest in real estate in the same way that you do stocks.
This post outlines five options for individuals eager to invest in real estate. The list contains both direct and indirect means of real estate ownership, as well as long-term and short-term investment alternatives. You should be able to find at least one method that appeals to you.
Five Methods to Invest in Real Estate
Rental Properties
This is the most traditional type of real estate investment. The idea is straightforward. Locate a great property, purchase it, renovate it (if necessary), and lease it to tenants who pay monthly rent. You can focus on either residential (single-family or multifamily residences, hostels, holiday rentals, and so on) or commercial properties (office buildings, warehouses, storage facilities, parking lots, hotels, retail centers, etc.).
The main disadvantage of this strategy is that it requires significant funds to get begin. You should also be hands-on (although you can hire a property manager). The benefits of this technique include access to leverage, steady income, and the opportunity of capital growth.
House Flipping
In this case, you buy an undervalued property, repair it to increase its worth, and then sell it for more money than you paid for it. Typically, house flippers strive to find, renovate, and sell their properties within six months.
This high-risk technique necessitates having sufficient skills to restore a house without going over budget. You’ll also need cash because you won’t be able to use a traditional mortgage with this technique. The advantages of this strategy are that you generate a lot of money rapidly, and your capital is only tied up for a short time.
Real Estate Investment Groups (REIGs)
This method is ideal for individuals who want the benefits of owning rental property but do not want to deal with the inconveniences of finding and managing a property. A typical REIG involves a property developer purchasing or constructing a group of buildings, usually an apartment block.
Individuals can then pay the developer to get ownership of one or more units in the building. Those units are still managed by the developer, who takes a percentage of the monthly rent and pays the rest to the investor. The disadvantage of this sort of investment is that it suffers from the same issues as mutual funds.
Real Estate Investment Trusts (REITs)
This strategy enables you to own real estate as if you were trading stocks; you may incorporate real estate into your portfolio without having to do a traditional real estate transaction. A real estate investment trust (REIT) is an entity that buys and operates real estate with money from investors.
Investors do not own shares in the property but in the corporation, and those shares, like stocks, can be traded on major exchanges. The corporation must distribute 90% of its taxable profits to investors in the form of dividends. The liquidity of the investment is the major advantage of REITs.
Real Estate Crowdfunding
This is the most recent type of real estate investment. Online real estate investing platforms enable investors to pool their resources and invest in real estate transactions or property developments. These investments are made through internet platforms, and investors can choose whether to invest for returns or equity.
The great thing about this method is that you don’t need much money to get started, and you may invest anywhere in the world. However, the investments are typically illiquid, and you must pay management fees, just as you would when purchasing mutual funds.
These are the top five ways to get started in real estate. To succeed in your first venture, conduct extensive research and seek professional advice.
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