Real estate is one of the best ways to earn passive income and build wealth. There are many ways to invest in real estate, and the good news is that you don’t need to have a lot of money to commence your real estate investment journey. In fact, you can get into the game with as little as $50. In this article, we’ll outline six ways to invest in real estate.
1)Fix and flip projects
House flipping is one of the most lucrative real estate investments. It involves buying undervalued properties, renovating them, and putting them on the market. Fix and flip projects make attractive investments because they offer considerable profits within a short period. With proper planning, a house flipping project can be done in about three months, making it a great way to make quick profits. The key lies in identifying neglected houses located in prime areas and giving them some love to match or exceed the value of the surrounding houses.
Many financial institutions like Pacific Northwest Capital Partners provide fix and flip loan programs to empower investors with house renovation projects. Some institutions go to the extent of funding the whole project, including the cost of buying the property. This helps to lower the barrier to entry for determined real estate investors. If you want to become a house flipping real estate investor, you just need to learn about real estate valuation, property renovation, and marketing.
2)Real Estate Investments Trusts (REITs)
If you don’t have a lot of money to invest or you are a risk-averse individual, REITs are probably your best real estate investment options. They refer to companies that own and manage income properties, such as rental houses, offices, warehouses, healthcare facilities, and retail centers. A REIT collects money from several investors and uses that money to invest in income-generating properties. Investors can then buy shares of the REIT and start receiving regular dividends proportionate to their shares.
A key selling point for REITS is their high liquidity. Like other stocks, REITs are bought and sold in major exchanges. By law, companies must pay 90% of their taxable income as dividends every year to maintain their REIT status.
3)Rental property
Owning a rental property is a classic way of investing in rental property. You can buy a single-family home, apartment, warehouse, or commercial property and lease it out to short-term or long-term clients. As a landlord, it is your responsibility to maintain the property and handle tenant issues. This makes rental properties suitable to investors who have the patience of managing tenants, DIY skills, and the time to do the job well.
While a financial institution can easily finance the purchase of a rental property, you will need substantial cash on hand for upfront property maintenance. In addition, unpredictable vacancies mean no income. Unexpected repair costs can also reduce your income.
On the upside, rental properties provide significant regular income and appreciation. In addition, most expenses, including repairs, maintenance, administrative fees, utilities, depreciation, mortgage interest, and insurance premiums, are tax deductible.
4)Real Estate Investment Groups (REIGs)
Real estate investment groups (REIGs) are formed by several investors who pool their money to invest in income-generating properties. They are suitable for investors who want to invest in real estate without the hassle of managing it themselves. An operating company handles property acquisition, management, and eventual sale on behalf of the investors.
5)Real estate crowdfunding
Real estate crowdfunding is a way for individuals or companies to raise money from multiple investors for the purposes of investing in real estate. Crowdfunding platforms simply bring together investors and real estate developers or property owners who are seeking to raise money for their business ideas.
While most real estate investment options require higher initial capital, crowdfunding allows smaller contributions, making it perfect for investors looking to invest in real estate who don’t have a lot of money. However, most crowdfunding projects are long-term investments, and you may be penalized if you opt for an early withdrawal.
6)Private equity real estate
This is a fund managed by professionals and invests in incoming-generating properties on behalf of investors. Private equity real estate differs from a REIT in that it requires hefty initial capital and is thus only available to wealthy individuals. Partners pool their money together and invest in properties in various regions.
Endnote
Real estate is one of the best ways to invest your money. Some options like REITs even allow you to start investing without much capital. However, like most other investments, the most suitable real estate investment options are the ones that best serve you. Your decision should be based on the amount of money you want to invest and whether or not you have the time and willingness to personally manage your real estate investment.
