There are numerous ways in which you can invest in real estate as long as you have the money, inclination, commitment, and time.
In addition, you need to have the ability to understand market trends in order to ascertain what the future value of a certain property in a specific location will be. Many people are now trying real estate investing online and using a real estate investing app as well.
You can read real estate investing book,get some advice and inputs from experts to help get you started off on the right foot. Over time you will learn how to invest in real estate with little money. Here we take a look at different ways to invest in real estate.
Active Real Estate Investments
This isn’t real estate investing for beginners as it involves a significant amount of hands-on management, and real estate knowledge.
Active investors are able to handle either part-time or full-time investing activities, depending on the number & nature of investment properties. They generally invest in real estate that has either one/few owners.
This means, ensuring the property’s success becomes their responsibility. Because of this, an active real estate investor requires financial & real estate acumen, and negotiation skills in order to improve their ROI and cap rate.
If you are looking for the best way to get started in real estate investing, you need to have an understanding of the different avenues open to you:
This is an extremely hands-on way of investing in real estate. In this process the investor purchases the house, alters and upgrades it to improve its resale value before selling it.
This is more of short term investing technique and investors tend to make a greater profit when they buy and sell quickly. But you need deep financial & real estate knowledge in order to bring in good profits.
This is another property-flipping option in which the investor signs all the paperwork to purchase a property they feel is going to appreciate quickly. Once it reaches their set price target, they sell the place to another investor.
Most often wholesalers purchase properties in need of renovations and upgrades and sell these to house flippers that are interested in handling all the renovations. The wholesaler takes on significant risk and also needs to have access to a wide network of house flippers to make good profits quickly.
Passive Real Estate Investments
This type of investing is a good option for people with a good amount of knowledge & expertise in real estate as well as novices. These individuals or companies only put in the capital. They hand over the responsibility of investing in real estate to professionals.
Just like stocks and bonds, a passive investor bears the responsibility for their investments only. Some forms of passive real estate investments include:
Real Estate Investment Groups
This type of real estate investing is ideal for individuals that want to own real estate without actually worrying about the daily running of it. The person would need some capital cushion as well as access to quick financing. This is a form of passive real estate investing that provides appreciation and income.
In real estate investing companies, the group builds or buys an entire set of condos or apartment blocks. They then allow investors to purchase these via their company, and the join the group.
The company manages all the units and handles interviewing tenants, advertising vacant units and regular maintenance of the property too. In exchange for all of this, the company will take a percentage of the total monthly rent.
The downside to these investments is that the management overheads can impact the returns. There is also the risk of vacancies, regardless of whether this investment is owner/group specific.
Real Estate Investment Trusts
Also called REITs these are perfect for investors that want good portfolio exposure to lucrative real estate without actually having to go through conventional real estate transactions. You would need investment capital to get you started.
REITs are dividend-paying stocks and their core business lies in commercial real estate. In this space, long-term leases that have a steady cash flow are the norm. Since these are stocks, the investors don’t have the leverage that regular rental real estate investors have.
REITs prove to be lucrative investment for investors in the stock market that want regular income. They are able to invest in nonresidential investments, such as office buildings or shopping malls. Since REITS are exchange traded, they are a highly liquid asset.
This also means, you won’t require a realtor & a title transfer when you want to cash out your investments.
Real estate investing offers you the opportunity to earn significant returns and it adds diversity to your portfolio. It has a strong track record and when managed prudently, can prove to become a valuable cash flow source in your investment portfolio.