Real estate investment is a risky affair these days especially after the subprime mortgage crisis that played a significant role in the recession. One needs to do thorough research to understand the real estate investing basics. The first step to avoid a mishap is to understand the risks and avoid working with dodgy lenders and companies. There are two types of real estate investment — either by buying or not buying property. It’s your call to decide which one you are more comfortable with.
Investing in real estate by buying property
Buying a property requires money so make sure you have saved up some money beforehand. Here are some tips to follow:
1. Buying and fixing
Buying a home and then fixing it accordingly requires funds and time. You need to have enormous knowledge about real estate and repairing. By this time of investment you buy a property, do the repairing and rent it to the tenants.
2. Renting to own
Renting to own a home is a process where you sign a contract to rent a home for a certain period with an option to purchase the home once the time expires. This process operates by paying a percentage of your monthly rent as the down payment on a mortgage when the purchase becomes official. This type of investment is good for people with other loans as it gives time to repay without any extra burden of a monthly mortgage.
3. Buying a Rental Property
Buying a rental property means buying a property and then renting it out to the tenants. Most people invest in this way, that’s why rental property investment is very common. If done correctly you, as a landlord will reap the benefits of such investment.
4. Vacation rentals
Vacation rentals are an innovative and profitable real estate investment business. This requires buying a house or property where you can make money by renting out to tenants for a short period. Another advantage of having vacation rentals is that you can make a large sum of money because the property is in a desirable area. Using Airbnb to rent out your property can also get you a decent profit.
5. Buying commercial property
Buying commercial property for renting offices or workplaces will work in your favor. Everybody needs to work! Thus renting your property to a company is a good investment for raking in cash. But a slight disadvantage is purchasing a commercial property is quite expensive. If you don’t want to buy it all by yourself, consider having a business partner.
Investing in real estate without buying properties
Buying property can be expensive for quite a lot of people. If you are not wanting to invest in buying properties, don’t lose heart. There are plenty of ways you can invest in the real estate business.
1. Invest in REIT
REIT also is known as Real Estate Investment Trust is a company that either owns or finances income inducing real estate. REITs focus on both residential and commercial properties. Some investment trusts also trade in mortgages instead of actual properties. Doing so they provide at least 90% of taxable income to the investor via dividends to the shareholders.
2. Mutual funds
A mutual fund allows investors to diversify their portfolio in terms of having a mutual fund and a real estate. You choose mutual funds that are growth or income-oriented. Mutual funds are subjected to risks regarding real estate so be wise and be extra cautious in terms of funding placements.
3. Investing in wholesaling houses
Wholesaling a house means contracting a potential house seller and taking that contract and selling it to the next buyer for a profit. If you are the wholesaler, you get to keep the profit all by yourself.
4. Using an online investing platform
You can earn money by investing in an online platform. Much like with other sorts of stocks, these online platforms can help you in the real estate investments as well. Often, these investments you make are a source of crowd-funding. If you are interested in real estate investment platforms you can check any online platforms.
5. Invest in real estate partnerships
Real estate partnerships are a common way to invest. Each person will be handling different responsibilities. The partnerships can be used to purchase property at a lower price. You can set the terms by paying a mortgage or by down payment for the property. Depending on the terms of your partnerships, you might not need too much to own a property.
6. Real estate investing companies
There are plenty of companies that work on the same level of real estate investing without you needing to own a house. For example, RE/MAX sells homes by real estate agents. Companies like these don’t involve buying an actual property but the agents. So, being a real estate agent will benefit you as well.
Investing money on real estate depends on the form of your investment. The more disposable income you have, the more options you attract. A minimum of $10,000 is needed to start a real estate business. For REIT, you might start with $500 on the lower end. Aiming for $1000–2000 should get you going in the business.