You might have had bad experiences with uptight landlords in the past but you know deep down they’re making bank. And now, you’re at a point where you want to make a mint yourself – and find that maybe that bad landlord was finally making sense.
Real Estate may have had its fair share of crises like bubbles and depression in the economy but decades after it’s still proven to be lucrative. It is one of the most profitable industries in over 10 countries, with the USA having the highest real estate investment market.
You can set up a solid foundation for real estate investing when you start smart. But, most aspiring investors don’t know where to start.
While investing in real estate guarantees to create wealth for you, especially when it is done right. You can set up a solid foundation for real estate investing when you start smart. But, most aspiring investors don’t know where to start. Here are some of the best ways to start investing in real estate.
Buy REITs
Before buying Real Estate Investment Trusts or REITs you have to know what they are first. A business that owns and oversees properties with an income stream is known as a real estate investment trust (REIT). Investors can then buy shares in a REIT and profit from real estate’s profitability without really owning any real estate.
Purchasing shares of a REIT requires far less time or knowledge than directly buying an actual property on your first time. What makes them enticing for early investors is that REITs typically pay out large dividends
This makes them a popular investment, particularly for retirees looking for large incomes. Investors can automatically reinvest those dividends to increase the value of their investment. This is perfect if they’re not up for regular income.
However, they can be tricky too depending on the type of REIT you purchase. For first-timers’ sake, it is best to invest first in publicly traded REITs that can be purchased through brokerage firms.
Rent out a Property
Here’s the chance to become a well-earning landlord version of yourself. You can buy out a rental property off of listings with multiple rooms or units and look for tenants. But of course, you don’t want to be the bad landlord you still have trauma from.
One of the practical ways to start real estate investing is having rental properties. It has the potential to give you a regular income stream derived from tenants. Also, it gives you an upside when you sell the property due to appreciation over time.
However, most rental properties require a large sum of capital. This allows for financing the renovations, bills, and maintenance costs for months. For instance, it’s the landlord’s duty to fix the plumbing when it malfunctions. Additionally, when renters vacate, there could be a delay in the flow of payments, and appreciation isn’t always a given.
Flip a House
This can be challenging for many but if you have the bucks and experience in renovation and sale, flipping a house can be a great deal. Flipping a house is somehow like house renovation shows you see on TV. You make an investment in an underpriced fixer-upper home, remodel it as cheaply as you can, and then resell it for a profit.
The flip side is that given the current higher cost of building materials and mortgage interest rates, giving a fixer-upper a much-needed love is more expensive than ever. The other risk of flipping is that you could lose money if you hold the home for a long time.
The longer you hold the property the longer you would have to pay the mortgage without receiving any revenue. In that case, you can try living in the property as you fix it up, that is if most of the renovations are surface-level.
Investing via Online Real Estate Platforms
A millennial approach to beginning real estate investment is via online real estate platforms also known as real estate crowdfunding. Platforms for real estate investing are for people who want to pool their money with others to invest in a larger commercial or residential purchase.
While less than what is needed to buy houses outright, this still requires funds for investment. Real estate developers and investors can communicate online using platforms. In return for regular monthly or quarterly payments that include interest, the investors contribute to the financing of real estate developments.
Invest with an REIG
Real Estate Investment Groups or REIGs are perfect for potential investors who want to own rental real estate without having to get their hands dirty. REIGs consolidate money from numerous investors to make investments in commercial or multi-unit properties.
Think mutual funds but a company that specializes in investing in rental properties. In a typical real estate investment group, a business purchases or constructs a collection of apartment buildings or condominiums, and then permits investors to acquire them through the business to become members of the group.
With an REIG you can own multiple properties or rental units and living spaces. However, the company operating the group manages your units, from maintenance, and marketing, to tenant relations. The company will then take a percentage of the monthly rent in exchange for managing your units.
To start your real estate investment goals, which approach is best should be what currently works for you, the investor. Think about how much time you have, the amount of money you’re willing to commit, and the type of management approach you’re willing to use over the long term. Ultimately, these are the most popular approaches to begin investing in real estate. However, over time you can use more than one approach to diversify your real estate investment income stream.
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