Are you interested in getting involved in real estate investment? It’s a smart move that diversifies your portfolio and can result in big financial gains. Getting started isn’t as hard as you may think. There are several approaches to consider taking. Learn more about the benefits of investing in real estate and how you can get started today.
Reasons to Invest in Real Estate
As with any new venture, investing in real estate comes with its challenges. You must do your research, come up with starting capital and devote the necessary time to make your investments a success. However, real estate investment provides an excellent opportunity to increase your bank account if you go about it correctly. Here are some of the top benefits. Through real estate investing, you can:
- Give your monthly income a boost with a steady flow of cash: Collect rent checks from your tenants for a dependable second income source.
- Build long-term financial security: If you invest in promising real estate, you can collect rent while making improvements and waiting for the property to appreciate.
- Earn passive income: Real estate investment allows you to earn an income without having to work for it each day.
- Enjoy tax benefits: Many expenses that come with owning and managing property are tax deductible. Enjoy lower taxes on capital gains when you sell a property for a profit.
- Enjoy great returns: Invest in the right properties, and you could see large increases in value that allow you to sell for a hefty profit.
- Diversify your investments: Investment diversification is a crucial strategy to protect yourself from extensive financial losses during economic downturns.
- Build capital: Earning steady money and selling properties once they rise in value helps you build capital that you can then put into other investments.
- Become your own boss: Owning investment properties is a good way to control your financial situation. You don’t have to answer to anyone else, giving you the freedom to take on projects that provide meaning and fulfillment in your life.
If these compelling reasons sound good to you, find out how you can turn your dream of real estate investment into a reality.
Top Ways to Start Investing
There are two main ways to invest in real estate. You can purchase physical property, or use an alternative method to invest without the hassle and demands that come with ownership. Here are some of the best ways to get into the real estate market.
Use an Online Platform
Opportunities for real estate investment abound online. Real estate investment platforms are services that connect investors with developers. As an investor, your money goes toward financing various projects in the hope that you receive regular distributions in exchange. There is a high level of risk in these, as there is no guarantee the project will make money. You also have to pay a fee to use the platform. This type of real estate investment is best for those who have disposable income available, as there are usually income and net worth requirements to meet.
Real estate investment trusts (REITs) are a great way to get involved in the real estate market without taking on ownership of a physical property. REITs are similar to mutual funds. The company maintains ownership of commercial properties like office buildings, hotels and apartment buildings.
REITs are a popular investment for retirees because they normally pay high dividends. Investors can either use the money as income or reinvest it. Some REITs aren’t publicly traded, while others are available for purchase through a brokerage firm. To go this route, you must first open a brokerage account.
Consider Rental Property Investment
One of the most traditional ways to get into real estate investing is by purchasing a property outright and then renting it to tenants to collect the rent money. This strategy applies to everything from a single-family home to an apartment building with multiple units. You can also buy and rent out commercial property such as office spaces and storefronts.
You’ll need to have the money to purchase the property or the ability to obtain a loan. It’s crucial that you choose your property carefully after doing some research. Only invest in a property that is financially sound, meaning the expenses and cost of upkeep is less than you can charge your tenants in rent. Keep in mind that you either need to hire a building manager or be prepared to answer the calls of your tenants and show up to fix any problems that arise.
Rent a Spare Room
This is a simple way you can ease your way into real estate investment and lower your financial risk. Taking on a roommate is a great way to decrease your current housing costs while saving up some money for future endeavors. If you already live somewhere with extra space available, you can start immediately. Or, if you want to purchase a home but worry about how to pay the mortgage and expenses on your own, renting part of the property is an excellent way to get the home you want without the financial pressure resting solely on your shoulders.
Try House Flipping
Another popular option to consider is flipping investment properties. This is where you purchase an underpriced property and invest the time and resources required to renovate it. Making improvements increases the home’s value, so you can resell it at a profit once you’re finished.
You need to have the available funds to purchase the house, plus the capital to purchase building materials, labor and other necessities to complete the repairs and upgrades. If you go about it in the right way and choose a property in a coveted neighborhood, you can potentially resell the home for a big profit.
Protip: It’s best to consider homes that need only superficial work and cosmetic improvements, as the longer your renovations take, the more money you have invested in paying a mortgage instead of unloading the property for a profit.
Ready to Get Started?
It can seem intimidating at first, but the best way to get your real estate investment started is to dive in. Gather your financial statements to see what capital you have available and start to research options online or in your area. Stay alert for properties and projects that spark your interest. Start slow, and don’t invest more than you can afford. As you become more knowledgeable and make some money, you can reinvest in larger or riskier projects.
Real estate investment is a solid opportunity that allows you to diversify your portfolio, build new streams of income and gain greater control over your finances. If you have the resources, the time and the will to get started, it is a worthwhile endeavor you should consider.
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