For many prospective investors, beginning to invest in real estate may seem confusing and arduous. Others believe that you often need to have millions (if not billions) of dollars to buy up as many luxurious apartment buildings as possible or be a pernickety landlord. He rents out another condo left to him by his departed grandaunt.
Although this is true in a few sporadic cases, generally, you do not need to have massive capital or even a property itself to be a property investor and enjoy all of the benefits of this lucrative field. Below are a few suggestions by a property manager on how you can buy residential real estate in case you are a newcomer to the entire thing!
Real estate Investment Trusts (REITs): How to invest?
If you want to invest in real estate but aren’t overly fond of the hassles of real estate development, you may want to look at real estate investment trusts or REITs. On the other hand, you can trade REITs on a significant exchange market, the same as how you would invest in a stock.
A corporation collecting money from several investors uses the funds later to purchase and manage real estate properties. Following U.S. law, the corporation must spend less than 90 % of its taxable income in dividends to investors; thus, as you can assume, REIT has the possibility for a very high yield. The taxes paid on earnings are generally higher than when trading in regular stocks. Liquidity is another benefit that you will get with REIT compared to other real estate investment vehicles.
If you are just starting and wish to test the waters, you can do a little research on real estate investment trusts, which are publicly traded, but you also need to be familiar with private REITs and non traded REITs, which require more capital and commitment.
Crowdfunding Platforms for Real Estate
Another option is to invest your money in real estate without committing to a property, and the online real estate platform is an excellent alternative to REITs. You can figure out how these platforms work if you understand the crowdfunding concept. These platforms allow real estate developers to connect with investors who pool their money to finance a project.
Feeling like part of the real estate investment process is what you get when using a real estate crowdfunding platform. In addition, you can choose to invest in specific properties, both residential and commercial. You can even monitor the progress of each investment.
Real estate crowdfunding has its downsides, of course. One of these is the illiquidity of your assets, which means you will not be able to withdraw quickly. Not only that, but the platform would charge you a management fee. Similar to private REITs, many of these platforms require significant initial investments. Nevertheless, you can find several alternatives like Fundraise, which calls for around USD 500.
Short-Term Rentals: a Close Look at What they Are
Another great way to invest in real estate is renting a short-term apartment. If you happen to have a spare room or travel a lot, it might be worth considering these options if you are interested in making money from real estate.
You might have leased a place for a short time yourself, and you know the drill. If not, you almost certainly heard about platforms like Airbnb, in which you can rent your own home for a couple of days in case you go on a vacation.
This option offers a couple of advantages worth pointing out. To begin with, you can work with everything you currently have, with no extra expenditures needed. You will also find that you will receive your first cash a lot quicker if you do it through an investing platform or a REIT. Even though short-term rentals require some commitment and time, you can always come back at any time. Lastly, it could be a great test for you if you think about purchasing a place to rent for one day.
Renting a Property: Might be a Good Idea
Here is the most obvious investment choice when it comes to real estate. Many people choose to buy another apartment to rent to long-term tenants as a source of guaranteed monthly income. The first rental place may be the first step to becoming a full-time property investor, with several properties around the city and the country.
Renting a property requires an enormous amount of effort and attention. You would be in charge of arranging for an excellent tenant to come in and care for the repairs needed. However, suppose it appears like too much work. In that case, you can always assign maintenance to the property manager (for an additional fee, obviously) and use a few dedicated platforms to display your condo.
House Flipping: What you should Know
If you have an artistic bent and a keen knowledge of the local real estate market, house flipping might be just what you need. The idea is to buy an undervalued property, zhuzh it up and resell it at a better price. There’s also no need to renovate or redecorate the apartment – a seasoned and lucky property investor, a so-called pure flipper, can buy a house when the market is shallow and then sell it later on for a significantly more significant sum.
Flipping a house is a risky business because you need to be aware of the current market conditions, the cost of repairs, and the price you could sell the apartment for. In addition, you have to bear in mind the mortgage you would need to pay during your hunt for a possible new buyer.