Investing in real estate is a great way to diversify your portfolio. Real estate is a tangible, usable asset, whether a commercial building, renting an apartment, or buying a home. And unlike other investments, real estate will consistently increase in value over time, and it is not as vulnerable to short-term fluctuation as the stock market. There are so many ways to go into the real estate industry. But like any other business venture, you need to know how to play your cards right when you want to invest in real estate. And when you choose the method that works best for you, find some useful statistics from Ofirio about listings of houses for rent or sales by the city to get the best deal. So, if you are interested in investing in real estate, here are five ways you can go about it.
Invest in Rental Properties
Investing in rental properties is one of the most popular ways to invest in real estate. Many people opt for this option because it helps them generate cash flow while the property increases in value. To invest in a rental property, you must own a building and rent it out to a tenant. The tenant, in return, pays you an agreed-upon amount monthly or yearly, depending on the contract. If you invest in rental properties, there are a few things you have to keep in mind. Importantly, you need to consider how much down payment you want to make on the property, and if you take a loan, how much of your mortgage loan you have to pay monthly. You also have to consider how much you charge your tenant, how to keep your units rented, and several other things.
Another way to enter the real estate industry is by flipping properties. As a realtor investing in flipping property, you invest in an underpriced property that needs a minor renovation, often inexpensive, and then resell it for a profit. If you want to invest in real estate through this route, you must understand the real estate market, and your calculations must be accurate. For example, your estimated cost of how much repair the house will require must be flawless. Moreover, selling a house is more complicated than renting an apartment. The good news about flipping properties is the potential for you to make more money if all things go smoothly.
Buy REITs (Real Estate Investment Trusts)
If you want to invest in real estate but don’t want to be involved in the execution, you can consider using a real estate investment trust company. These companies own, operate, or finance income-generating properties. Hence, when you invest in them, all you have to do is sit back and collect dividends. While REIT companies save you from the hassle of investing in real estate, REITs on their own can be complex. There are different REIT companies, some of which trade on an exchange like stock while others don’t. The level of risk in these companies varies based on the company’s model. So, if you want to invest in REITs, ensure that you fully understand the company model and be comfortable with how they do business.
Using RELP (Real Estate Limited Partnership)
While RELP works similarly to a REIT, they are pretty different in structure and organization. The main difference is that a RELP company gives you and other investors the opportunities to buy, develop, lease, and sell properties that would have been difficult to afford or manage independently. You can also invest in real estate with a real estate limited partnership. Also, RELP companies are a form of private equity that exists for a set of terms which can be anywhere between seven and twelve years. But during this term, a RELP company functions like a small company devising a business plan and discovering properties to purchase, develop, manage and sell off for a profit which will be distributed along the way.
Undoubtedly, real estate investment is capital-intensive, making many people shy away from it. Hence, crowdfunding is another way to get into the industry if you can’t come up with the funds you need to start your real estate business or have access to a mortgage.
Real estate crowdfunding is a brilliant strategy you can use to raise capital from a large group. The idea here is to pitch your idea to a group of people with funds to invest. In return, the investors receive debt or equity in the development project monthly or quarterly, depending on the agreements.
Investing in real estate is more accessible than you think. So, if you want to increase your portfolio, real estate is an excellent industry to invest in. There are many ways to get involved, so find a route with the right mix of risk and reward you are comfortable with.