Here’s How You Should Smartly Invest in Real Estate
Planning to invest in real estate? Naysayers might argue that the success of real estate moguls is a notable inheritance. In reality, it’s the opposite. You can see scores of stories of real estate millionaires who started from scratch, didn’t have a penny to their name. Here the question that pops into everyone’s head is “How on earth were they able to go from rags to riches?” Well, they were persistent, utilized their time, and were patient when it came to investing in real estate. Each of these factors manifested differently for every investor and they were eventually able to overcome any hurdles.
As a real estate investor, a solid plan of what you want to do with the property, focus on your end goal, and investing smartly can help you avoid the analysis paralysis that stops people from taking a leap of faith into investing. There are several different ways to invest in real estate, and each has its capital requirements, ROI, and risks. Here’s how you can smartly invest in real estate:
Flipping Investment Property
Buying a distressed property and renovating it for resale can be another way to move forward in real estate investing. Although this type of investment is a wee bit harder than it sounds, the ROI can be worth it provided the repairs are solid and the area is perfect. Another risk factor here is the possibility that you underestimated the repairs needed and of course the cost along with it. You need an experienced contractor who is good at estimating and managing such projects.
Investing in Rentals
Buying a residential or commercial property is probably the oldest and an excellent way to invest in real estate alongside building wealth and generating income. However, buying a rental property can be quite expensive as most lenders want at least 20% down for an investment property loan but with a perfect combination of income and equity appreciation, you can generate income hand over fist.
Another way to profit from such rental investment is House Hacking — a strategy where you live in your investment property and rent out rooms or units. Additionally, skimming through a newspaper or craigslist can be a great source for rental investment opportunities.
Investing in REIT
Investing your capital in companies that own different types of commercial real estate properties like hotels, offices, malls, etc and sharing stakes with other investors in the same is a great way to ensure portfolio diversification. Although the lack of liquidity can be a setback, however, it’s the easiest way. There are both public and private REITs out there but only accredited investors (high net worth) have access to private REITs for a newbie investor to get started, so your best shot is a publicly-traded REIT.
Real Estate Investing Platforms
Whether you’re planning to become a part of syndication and share the ownership of a rather ambitious real estate, or you’re willing to invest your capital in that amazing deal you saw online up for crowdfunding, both are rather easier and hassle-free of making money passively. In the case of syndication, a sponsor pitches a deal to a group of investors who invest their capital in the deal and share the ownership and returns. As for crowdfunding, mostly accredited investors as defined by the SEC guidelines pool their capital to kick off real estate projects.
Several platforms connect real estate developers/sponsors to investors who are willing to finance their projects, through debt or equity. Investors, on the other hand, receive monthly or quarterly distributions in return for their investment.
If done right, real estate investing can be lucrative and can increase your profit graph exponentially. As an investor, you need to be on the lookout for the best options you have and ultimately decide which one works for you.
