Thinking of investing in real estate? What comes to mind might be buying a property and renting it out. You’d essentially be like the landlord you paid rent to when you bought your first apartment. But, when you think of landlords, you think of someone haggard and always grumpy probably due to dealing with all the complaints from tenants and more. Investing in real estate can seem like more trouble than it’s worth. However, let us dispel that common misconception. Investing in real estate does not only encompass renting out rooms or apartments, as there is also more to it.
You may also want to check out real estate companies such as fraser group to see what properties they have to offer. So, if you are new to real estate investment, here are five ways to get you started on diversifying your investment portfolio with real estate.
1. Buy Real Estate Investment Trusts (REITs)
For those of you who have experience in investing, these are usually compared to mutual funds. So, instead of actually purchasing a physical property, you will be investing into companies that own commercial real estate like retail spaces, office buildings, hotels, and apartments. Investment in REITs tends to offer high rebates and that makes them an attractive instrument for those enjoying their retirement. However, with high rebates, there is definitely some exchange depending on the kind of REIT. If you are new to investments in REITs or more risk-averse, it is better to start out with publicly-traded REITs as they are less complex. These can be easily sourced from brokerage firms. So, in order to start off your journey as a REIT investor, you will first have to open up an account with the brokerage firm which should take no more than 15 minutes which normally does not require any initial deposits unless you are intending to purchase a REIT on the spot.
2. Using real estate investment platforms online
These platforms link up real estate developers to their investors. So, real estate developers are people who are looking to build up certain properties and this requires financial support. So, an investor is someone who is interested in being the one to provide this sort of support. This transaction is usually done as equity or debt. So, in return for financing the project, investors typically aim to receive distributions every month or every three months. The downside to this is that this kind of investments are speculative and illiquid. This means to say that it is not as easy as calling and putting as you would in stocks. Furthermore, in order to take part in this sort of investment, you would need to already own a large capital, which as defined by the Securities and Exchange Commission, are people who have earned an annual income greater than $200,000 for the past two years running. $300,000 if you are investing with a spouse. Either that, or you’ll need to have a net worth of at least $1 million, which is not inclusive of the property that you reside in.
3. Consider investing in a rental property
The difference in this method is that you will be purchasing a physical property. In fact, it does not even have to be newly purchased. If you are currently staying in an apartment with many rooms that are unused, rent them out. Not only will you be able to cover your own utilities expenses. You can also earn a passive income from the renters. This is also known as house hacking. By utilizing this life hack, you can purchase an apartment with no more than four units but still be entitled to enjoy a residential loan. Of course, this is not the only way to go about things. If you have additional income to spare, you can purchase an entire property that is on the lower end of the expense spectrum, and rent out all the units or the whole apartment. Of course, if you are worried about becoming the landlord we mentioned at the start, you can look to hiring property managers to take on that role as well.
4. Think about flipping your investment properties
Here flipping means buying an underpriced home, giving it the necessary touch-ups at the lowest possible cost, then selling it to earn profits. This strategy is definitely the most difficult in the whole of this list. In buying a physical property, you will be taking on plenty of risks. What you will need to have is a stellar calculating mind capable of estimating the renovation expenses. This is a crucial step as miscalculation could cause your profits to experience a dip or in the worst-case scenario, result in the loss of your initial capital. This means that you would have paid to design someone else’s house for them. Furthermore, you need to be well-connected because the longer you hold on to this investment piece, the more mortgage you would have to tank, which will also eat into your profits. So, before you delve into this, ensure that you have sufficient capital to fund this hefty investment project and a trusty contractor who can provide you with more accurate quotes on the expenses required.
5. Room for rent
The above tips may require some leap of faith as most real estate investment requires huge amounts of capital. For those with limited capital to work on, you can start out with something as simple as renting out an unused room. This may sound similar to an investment in rental properties but this requires less commitment. You can rent out to those who only require accommodation for a shorter period of time. What comes to mind is Airbnb. You can start off by renting your rooms to travelers who will only stay for a short period but at the same time rake in a satisfying amount of income. Furthermore, for those of you worried about absorbing any damage costs, there is no worry about that. Potential renters will be scrutinized by Airbnb and if not, there is a guarantee that extends protection against damages.
Thus, the above are all the ways you can get into real estate investing, the best one to start with is whichever one best matches with your current situation!