Real estate investing may help diversify your portfolio, and getting started can be as simple as purchasing a mutual fund. You probably don’t want to be a landlord if you’ve ever had one: Answering phone calls about damaged and overflowing toilets does not appear to be the most appealing profession.
However, when done correctly, investing in real estate can be rewarding, if not glamorous. It can assist diversify your current investment portfolio while also providing an additional income source. And many of the top real estate ventures don’t necessitate being at the beck and call of a renter.
The problem is that many novice investors have no idea where or how to begin investing in real estate. Here are some of the finest ways to generate real estate investments.
Best Real Estate Investment Strategies
1. Invest in REITs (real estate investment trusts)
REITs permits you to invest in real estate without owning any physical property. They are corporations that own commercial property such as office spaces, retail spaces, apartments, and hotels.
They are frequently compared to mutual funds. REITs typically provide substantial dividends. Yet, making them a popular retirement investment. Investors who do not require or desire monthly income might reinvest dividends automatically to increase the value of their investment.
Are real estate investment trusts (REITs) smart investments? They can be, but they can also be diverse and complicated. Some are traded on an exchange like stocks, while others are not. Because non-traded REITs are difficult to sell and value, the type of REIT you buy might have an impact on the amount of risk you take on. In general, new investors should adhere to publicly listed REITs. They may be purchased through brokerage firms.
2. Make use of an interactive real estate investment platform.
You’ll recognize online real estate investment if you’re familiar with organizations like Prosper and LendingClub, which match borrowers to investors eager to lend them money for a variety of personal needs like a wedding or house remodeling.
These embedded platform real estate developers with investors looking to fund projects with financing or equity. Investors expect to earn monthly payouts in return for getting on significant risk and paying a platform fee. These, like many real estate holdings, are speculative and illiquid; you can’t just dump them like a stock.
3. Consider investing in rental homes.
Tiffany Alexy had no intention of becoming a real estate broker when she purchased her first rental home at the age of 21. She was a senior in college in Raleigh, North Carolina, and she wanted to attend grad school there, so she believed owning would be better than renting.
Alexy entered the market utilizing a tactic known as house hacking, a term popularized by BiggerPockets, a real estate investor help website. It simply means that you are occupying your real estate, either by renting out rooms as Alexy did or by renting out apartments in a multi-unit complex. According to David Meyer, the site’s vice president of growth and marketing, home hacking allows investors to buy a property with up to four units while still qualifying for a residential loan.
You can, of course, buy and rent out an overall investment property. Find one with comparative expenses less than the rent you can charge. You’ll also need to hire a property manager if you don’t want to be the person who shows up with a toolbox to fix a leak or even the person who calls that person.
4. Think about flipping investment properties.
This is HGTV in action: you invest in a low-priced home in need of some TLC, renovate it as cheaply as possible, and then flip it for a profit. The approach, known as house flipping, is a little more difficult than it appears on television.
The additional risk of flipping is that the longer you keep the house, the less money you make because you’re paying a mortgage while not earning any money. You can reduce that danger by living in the house while it is being repaired. This works if most of the upgrades are cosmetic in nature and you don’t mind a little dust.
5. Make a room available for rent
Finally, you might rent out a portion of your home on a site like Airbnb to get your toes wet in the real estate seas. It’s house hacking for the commitment-phobe. You don’t have to take on a long-term tenant, potential tenants are at least partially prescreened by Airbnb, and the company’s host guarantee protects you from harm. Renting out a room appears to be a lot more approachable than the esoteric concept of real estate investors. You can rent out a spare room if you have one.
The finest real estate investments, like all financial decisions, are those that best suit you, the investor. Consider how much time you have, how much money you’re prepared to commit. Also whether you want anybody who handles home issues when they arise. If you lack DIY abilities, consider investing in real estate through a REIT or a crowdsourcing platform instead of directly in a property.
