If you are just new to investment, learn our detailed guide on how to invest in Real Estate. Is it similar to the other investment type?
Real Estate investing is one of the investment strategies that can be either lucrative or satisfying. Unlike bond and stock investors, real estate owners can utilize the leverage to purchase a property by paying a percentage of the total cost straight away, then, paying off the balance along with the interest over time.
Investors who invest in Real Estate will be able to make money by becoming rental property landlords. They can also earn income be becoming flippers, purchasing undervalued real estate, fixing it up, and finally selling it for a profit
Now let’s find the 5 detailed guides on how to invest in Real Estate in the review we are going to share as follows:
Rental properties have been a great chance for individuals who have DIY projects skill and the patience to handle the tenants. Sadly, this strategy needs basically financial support to back up the maintenance costs and to cover the unoccupied months.
Among investors, rental properties is a good way of investing in real estate to the opportunity to gain a regular income and the ability to maximize the capital using the leverage.
Based on the U.S Census Bureau Data, the new home sales prices can increase consistently in value since the 1960s before reducing the financial crisis. Plus, it is clear that the coronavirus pandemic also gave long-term effects on real estate values.
Real Estate Investment Groups (REIGs)
Real Estate investment gives you an option to invest through REIGs. It stands for Real Estate Investment Groups that are considered ideal for those who want to run real estate without a problem. However, investing in this option requires a capital cushion and finance access.
REIGs are similar to small mutual funds that allows the owner to invest in rental properties. In a typical REIG, a company can either buy or build a set of apartment condos and provide the investors with the chance to purchase them via the company. Usually, they will be required to join the group, first.
A single investor can generally invest by owning one or multiple units of self-contained living space. However, he/she cannot handle it by his/her own. Instead, the company that operates the investment group will collectively manage all the units, advertise the vacancies, handle the maintenance and interview the tenants. In exchange for managing those tasks, the company will take the benefits out of the monthly rent payment.
A standard real estate investment group contract includes the investor’s name and all of the unit group. Finally, you will receive your income though your unit is empty or having no tenant yet. This way, the cost would still be covered as long as the vacancy rate for the grouped units doesn’t spike too high.
Some investors love to invest through REIGs as there are more hands-off than just owning the rentals. It also provides not only income but also appreciation. However, some other people begin to think twice as investing through REIGs arises vacancy risk. Furthermore, the fees are much similar to those associated with mutual funds.
If you are looking for the best way on how to invest in Real Estate for experienced level, House Flipping can be your perfect option. Truly, House Flipping is suitable for people that have already an experience in real estate marketing, evaluation and renovation. Like the former guide on real estate investment above, this one also required capital and the capability of doing, overseeing, and repairing as needed.
House Flipping is known as a “wild side” of investing in real estate. Unlike other investments, real estate flippers are trying to gain profit by selling the undervalued properties they purchase in not more than six months.
As the pure property flippers do not include the property improvement in the investment, an intrinsic value should be already owned to turn a profit. Otherwise, the property will be eliminated from the contention.
The problem arises when flippers cannot unload their property, therefore, they cannot keep enough uncommitted cash on hand to pay the loan on a property over the long term. This can cause the flippers to lose their investment.
To earn money, flippers can also buy affordable properties and add value by firstly renovating them. This can be a good way of investing in a long term as the investors can only afford to take on a single or double properties at one time.
House Flipping is preferable among investors as they can tie up the capital for a shorter time period. House Flipping also offers quick returns. However, investing in real estate with House Flipping requires deeper knowledge about its market. Furthermore, the hot market cooling is also unexpected.
Real Estate Investment Trusts (REITs)
Are you an investor that wants portfolio exposure to real estate without having transactions on a traditional real estate? If so, opt for Real Estate Investment Trusts (REITs). Truly, this investment method is created when a corporation uses its investors’ money to buy and manage the income properties. REITs are purchased and sold particularly on major exchanges just like the other stocks.
To maintain the REITs status, a corporation must pay 90% out of its taxable profits in term of dividend. Thus, REITs don’t have to pay the corporate income tax. On the other hand, the regular company will have to pay the tax through its profit and then decide whether to distribute the after-tax profit as dividends or not.
Similar to the dividends-paying stocks, REITs are the solid investments matching to the stock market investors aiming at regular income. Compared to the previous types of real estate investment, REITs tend to enable the investor’s entry to turn to non-residential investments like office buildings or malls that are not reasonable to directly purchase for individuals as well as for investors.
More prominently, as one of the options on how to invest in Real Estate, REITs investment is considered highly liquid as they are exchange-traded trusts. This means, there is no real estate agent or title transfer needed to help you make a cash of your investment. In fact, REITs come with more formalized version of the investment group of real estate.
All in all, investors should differ the equity REITs possessing buildings from the REITs loan that offers financing for real estate. Though they both provide exposure to real estate, the nature of exposure is completely different. Equity REITs seem more traditional in representing ownership in real estate while the RITs loan emphasizes the income from the real estate loan financing.
Many investors prefer this REITs due to its essential dividend-paying stocks and the core holdings that tend to be long-term.
Online Real Estate Platform
The last but not least recommended guide on how to invest in Real Estate is online real estate platform. It is created for those who would like to join other investors to invest in a bigger residential and commercial deal. The investment is built through online platform that is also popularly known as real estate crowdfunding. Like other previous real estate investments we have mentioned here, this type also requires investing capital though less than the number of the total properties required to buy.
This online platform for investing in real estate works by connecting the investors who look for finance projects with the real estate developers.
Investors prefer this earl estate investment type due to the fact that they can invest either in a single project or in portfolio of the projects. Moreover, online real estate platform offers geographic diversification.
Now a big question is whether or not this online platform is risky for real estate investment. In comparison to other real estate investment forms, this one can be somewhat riskier. That is probably because it is relatively new in the world of investment. In addition, some projects may likely to appear on its website as it cannot source financing from the traditional means. Thus, online real estate platforms needs its investor money to load for a period of years to come. This makes the investment somewhat illiquid. However, based on Investopedia research, the platform is able to boast annualized returns up to 20%.
Why You Should Consider Real Estate Investment
You must be wondering and curious why you should consider real estate investment, right? If only you knew, Real Estate is a distinct asset class that many experts recommend to add it into a person’s portfolio and investing, of course. That’s due to the fact that this investment doesn’t usually relate to bonds, stocks or commodities. Real estate investment also enables you to earn income from either loans or rents payment dealing with the potential for capital advantages.
A Few Tips to Invest In Real Estate
There are a few tips you can learn concluded from our detailed guide to invest in Real Estate. As this investment requires you to purchase property and manage it to gain a return, the first thing you may think of is to purchase a property.
And, think of what strategies you want preferably use. This way, you may select a type from the 5 options we have shared above. Don’t forget that you opt for a type that suits your ability, affordability, and passion.
Once you took your option, understand well how the investment work and potentially allows you to gain profits. Also, find out why people consider investment strategies. If an investment type offers profit more than the risk, perhaps you can take it into your list. On the other hand, of the investment type is riskier, making you doubt whether it is satisfying or dissatisfying instead, think of the other investment type that may be more profitable.
Learn well about the opportunities at which you can gain huge returns or even may lose your investment time. As there is always the right time that opens a chance, there is also a time when you are at risk. In other words, you know the right time to invest in real estate.
One more, understand that there is no investment without any risk and there is no investment that grants you even no profits. This may put you in a high comprehension of the way of investing.
Now that you know our detailed guide on how to invest in Real Estate, you may try to start investing. All in all, you can earn the returns from this real estate investment by building out a robust investment program and paying at least a small part of the property’s total value regardless the investors use their property to gain rental income or just to bide their time until the opportunity for a perfect sale arises.
Real Estate investment is relatively profitable no matter the overall market is up or down.