Today in this post I am going to tell you in detail how to invest in real estate, so let’s start without delay. Everybody wants their money to grow. Some people do active work to earn money while there are plenty of people who are intelligent enough that they do not work actively for their money to grow.
The latter is being practiced by very few people but it is becoming more and more popular as we have been introduced to different kinds of thoughts. One such kind of thought is investing. There are tons of ways you can start your investing. You can either enter the stock market or you can invest in properties called real estate.
Real estate investment is a popular investment strategy and it is used by numerous people in the United States to generate a large income. So in this following article, you are going to learn about real estate and how you can invest in real estate.
- Crowdfunding Real Estate Platforms
- Real Estate Investment Trusts
- Invest in Rental Properties
- Invest in Real Estate by Flipping Properties
Crowdfunding Real Estate Platforms
One of the most popular ways of investing in real estate is crowdfunding. People who want to invest in real estate directly can own this very unmediated process to make their investment in real estate.
As the name of the process suggests, this type of investment is done via the funds of crowds or better say the investors. In this process, several investors invest their money which generates a huge amount of money altogether. And with the gathered money, the agency/organization invests in real estate.
While reading the post, it might seem an easy way with no hassle, but some hassles are present in this way of investing too. First of all, the amount of money you can invest in real estate is not fixed. The amount usually varies from $500 – $5000. If you consider investing just $300, maybe just as a beginner, it may not be possible to get started with just that amount of money.
Some crowdfunded real estate platform contains various kinds of hidden charges too. This is why all the time the expected amount of returns can not be got. So, before investing, one should always check and enquire whether there are any hidden charges present.
- One of the best processes of investing in real estate.
- Can generate a good return.
- Needs more money to invest.
- Not recommended to get started with.
Real Estate Investment Trusts
The main disadvantage of the aforesaid process of investing was that you can not invest any desired amount of dollars. But, the process which we are going to discuss now, can be very beneficial as with this process you can invest any amount of money into real estate. This is not the only plus-feature of this strategy, this process has proved to be a more secure path of investment among all the ways of investing in real estate.
Everything including shopping malls, multi complexes, office buildings, and store-houses is built with the investment collected by these funds.
Real estate investment funds (often called REIT(s) in short) are somewhat similar to a fund / a company that acts and collects money from investors in the same way as stocks do. When one invests in those REITs, they get the stakes of the real estate.
How Investors Can Get Their Money Back?
After the building process when the buildings are sold to individuals/organizations, the investors get the returns. The investors get the returns in the form of dividends.
The best part of these REITs is that you can buy and sell them on stock exchanges exactly as shares. This is the reason it is so much liquidized. Just like stocks, in the stock exchange, you can even purchase a group of REITs by purchasing ETFs.
Beginners can even purchase rational shares of ETFs via different apps or websites like M1 Finance, Robinhood, etc. That’s why for individual investors, this is probably the best option to start the journey.
- You can get started with very little.
- It is more liquid.
- Can’t generate a good amount of returns compared to the above.
Invest in Rental Properties
If you are really passionate about investing in real estate, you can also invest in rental properties. Now, here comes the question – What rental property is? – In simple words, rental property is the property in which you are permitting anybody to live or use it for a specific amount of cost (fair) for a specific time frame (e.g. – for a month). It is just lending your property.
The main problem in investing in real estate is that you have to invest a large amount of money to build the property and once it is built you will get the returns in only one installment. But, how good would it be to get a consistent amount of writing over a large period of time?
This is when rental properties in real estate come into play. When invested in rental properties, you can get a fixed amount of returns.
There are primarily two types of rental properties – 1) Long term rentals, and 2) Short term rentals.
An example of long-term rentals maybe those who want to live in your property as a home. And in the case of short-term rentals, the tenets tend to live in for a shorter period of time.
While this seems to be very less-hassling but you have to be very careful in choosing your tenants. You may have to be responsible for any major problem if it occurs etc.
- It can generate a fixed income and can be used as a great tool for your retirement planning.
- The renters of the property may make trouble and you may fall in trouble for their dispute.
Invest in Real Estate by Flipping Properties
Another popular strategy of investing in real estate is by buying and flipping properties. Many investors consider this over rental properties.
In this process, you basically purchase the property and wait for the appropriate person to sell the property. This process works like buying a stock, holding it for the short term, and when the market price of the stock is at its peak, selling it to earn a good amount of money in a shorter duration. In other words, it is the trading of real estate.
This strategy is owned by real estate investors who buy a good property in a fine location. In this process, inventors can make quick profits, so if you have a good amount of money for investing in it and want to quickly increase your money, you may go for buying – holding & flipping the property.
But, don’t ever mind that anybody can make money with it – to apply this strategy you have to be in this business for decades, to make money out of it, you need weeks of planning, thinking, and successful execution.
- Can generate a good amount of return if you are a geek.
- Can get your money locked in.
As we have well understood the different kinds of processes to invest in real estate, now let’s understand –
Whether You Should Invest in Real Estate or Not? & Who Are the Best People to Invest in Real Estate?
First of all, let’s understand who should invest in real estate. People having a lot of wealth can enter into the business of real estate. If you do have at least 500 dollars, which if lost in any case, you would not ever regret, you are welcomed into this business. Investing in real estate needs lots of money to be put into a lump sum investment. This is not as easy as investing just $150 as a SIP in a mutual fund.
Investment in real estate is not always recommended for traders who want to make profits in the short term. Often real estate investors do not get the proper buyer of the property to sell the property to them, in these kinds of cases the real estate becomes more or less illiquid. So, if you have your necessary wealth invested in it, it will get locked in without a proper buyer.
If you are very passionate about investing in real estate, we would recommend you contact your financial advisor before making any financial risk.
Real estate is a very popular process of investing your wealth apart from the stock market. It is often considered to be a good process of investment. investing in real estate is very popular among Americans and it is getting more and more popular in the world.
There is no exact amount to get started in real estate. As we have discussed in the article, you can buy fractional shares of a real estate ETF with a minimum amount of money. But to directly invest in real estate and generate a good return from them you need to invest at least $500-$1000. And it is a fact that real estate requires more capital than buying shares in the stock market.
Without any income, it becomes impossible to buy any house or any other property. You will not get any share in any real estate without making any investment. So without any income or without any investment, you can’t buy any house or real estate.
Risk is present everywhere in the field of investment. But real estate involves a comparatively lesser risk than investing or trading in the stock market. It is because the price of the property is not as volatile as the market price of shares.
The price of any property does not go down at once and uplift at once as stocks do. In short term, it can be a bit risky, but if you are planning to get a good return in long term, it will involve very little risk.
In this article, we have tried to discuss the best ways to invest in real estate. I hope that you have been able to understand them. If you have additional queries regarding how you can invest in real estate and get a good return you can let us know by commenting down in the comment section.
Please mind that no investment process can make you an overnight millionaire. We recommend you consult with your financial advisor if you want to invest in real estate.