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When done in the right way, real estate investment can be a lucrative investment opportunity. It can create an additional stream of income for you while diversifying your investment portfolio. Most importantly, it is not really difficult to get started with real estate investment.
Unfortunately, however, many aspiring real estate investors don’t know where they should invest in real estate. According to National Realty Investment Advisors, some of the best ways to make money by investing in real estate are as mentioned below.
Real Estate Investment Trusts or REIT:
REITs or real estate investment trusts make it possible for individuals to invest in real estate even in the absence of any physical real estate. Comparable to mutual funds, REITs own different types of commercial real estate properties such as hotels, apartments, retail spaces, office buildings, etc. REITs are one of the most common investments in retirement because they generally pay high dividends. Investors that are looking for regular income can grow their investment further by reinvesting those dividends.
Though REITs can be good investments, they are generally complex and varied. Some of these are not publicly traded and some others can be traded on an exchange. The amount of risk for investors is determined by the type of REIT purchased. As non-traded REITs are difficult to value or sell, beginners should opt for publicly-traded REITs.
Online Real Estate Investment Platforms:
Online real estate investing platforms are somewhat similar to lending companies that connect borrowers to investors looking to lend money for personal needs such as home renovation, weddings, etc. Through these platforms, real estate developers can get in touch with investors willing to finance projects through equity or debt. Investors not only take the risk of investment but also take care of the fees payable to the platform. In return, they expect to receive quarterly or monthly distributions. Please remember, however, that these investments are illiquid and speculative. As an investor, unlike trading stock, it is not possible to unload these investments easily.
Another concern in investing in these platforms is that you need money in order to earn money. Also, many of these platforms are open only to accredited investors.
Investing in Rental Properties:
Aspiring investors may also enter the real estate market using a strategy often referred to as house hacking. It means the occupancy of someone’s own investment property by renting out rooms or units in case of multi-unit buildings.
Obviously, it is also possible to buy an investment property and rent it out entirely. Ideally, investors should try to invest in properties with combined expenses lower than the rent received.
Flipping Investment Properties:
This method involves investing in an underpriced property to renovate it as inexpensively as possible, and then making a profit by selling it off. This strategy is difficult to implement and has a bigger element of risk involved. House flipping requires an extremely accurate estimate of all required repairs.
Another risk for the investors is that they pay a mortgage without earning any income. Therefore, the longer they hold the property, the lower amount of profit they make.
Renting out a Room:
Finally, for those looking to dip the edge of their toe in the water of real estate, renting a part of the home via online platforms such as Airbnb can be a great start. This option has many advantages compared to house hacking. Firstly, there are no long-term tenants. Airbnb also prescreens the potential renters to some extent and offers a host guarantee for protection against damages.
Like any other investment decision, real estate investments that serve the interest of the investors in the best possible way are the best investment options. Before taking the plunge, decide on the amount you are willing to invest and how much time you have. If you are a beginner, instead of investing directly in a property, consider investing through a REIT.
