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Investing in real estate is no longer restricted to the super wealthy. According to a recent survey, real estate investors now make up 15% of the population. That translates to almost 50 million individuals who invest in at least one property other than their primary residence.
In fact, 89% of U.S. investors are interested in putting their money in real estate because of benefits such as cash flow, tax incentives, leverage, and value appreciation that come with investing in multiple properties.
Are you curious about investing in real estate? If so, here are five different ways you can get started:
1. Buy and rent
This is probably the most traditional way to invest in real estate. It simply involves buying a property and renting it out. Now is a good time for this kind of investing because rental rates are on the rise (8% since last year) but the downside of this investing approach is the time and effort needed to manage and maintain your investment.
2. Buy and sell
Also known as home flipping, this involves buying a property and reselling it soon after for a profit. Home flipping has offered a record-breaking 49% return in 2016.
Home flipping offered a record-breaking 49% return in 2016.
3. Real estate investment groups
Real estate investment groups are organizations that buy a set of properties and then sell them to individual investors.The main benefit of this approach is that you typically do not need to act as the landlord because the investment group handles property management for you (for a fee of course).
4. Crowdfunding sites
Recently, there's been an explosion of sites such as Prosper and Lending Club, which allow individuals to invest in various real estate development projects. Through crowdfunding sites, you can be a part of a large-scale property investment while investing only a moderate amount of money. On the other hand, crowdfunding sites act as a middleman and charge fees which can eat into your profits.
Real estate investment trusts (REITs) are like mutual funds for real estate.They typically pay high dividends. However, they also do not offer all of the typical benefits of investing in real estate, such as increased leverage and tax benefits.
Each of these investing approaches offers a tradeoff between possible profits, risks, and costs.
The one constant is that you can minimize your risks with due diligence and by consulting with an experienced real estate professional.
If you have any questions for us or you’re interested in investing in real estate yourself, don’t hesitate to give me a call or send me an email. I look forward to hearing from you.