With the right approach, investing in real estate can be a rewarding decision that diversifies an investor’s portfolio and provides a consistent income stream. While this is the goal of every individual who considers real estate, the trouble is that many don’t know where or how to start. The following are some of the ways to invest in real estate.
Real Estate Investment Trusts (REITs)
Real estate investment trusts, or REITs, provide an avenue to invest in real estate without owning any physical property. They’re comparable to mutual funds, in that REITs represent companies that own property such as apartments, office blocks and retail spaces. The dividend pay-out from REITs is one of the aspects that makes them popular, and investors who wish to grow their investments can choose to reinvest these dividends.
REITs are a good starting point for investors looking to get into the real estate market who lack the capital to buy a property. Through the returns earned from a REIT, an investor can eventually accumulate enough to become a property owner.
Consider Flipping Properties
Once an investor has the capital to make a down payment on a property, they can choose to rent or flip the house. The latter is the process of purchasing an under-priced house in need of renovations, undertaking the necessary improvements, and selling the house for a profit. While it sounds relatively easy, house flipping requires an accurate understanding of the cost of repairs, which is not always straightforward. Additionally, many investors who flip houses take out mortgages to do so. Using someone else’s cash to renovate might be smart, but holding on to the property for too long reduces the potential income that flows back to the investor.
Getting into the real estate market as a landlord is a good opportunity for individuals with the skills to manage tenants. However, this approach requires substantial capital to cover any vacant months and meet maintenance costs. As long-time property investor Razi Salih knows, investing in rental properties can provide regular income to the owner, and when they choose to sell the house it will have likely appreciated in value.
The downside to a rental property is that managing tenants can be tedious for an owner to do by themselves. Additionally, having tenants raises the possibility of damage to the property, which the landlord will have to deal with if it occurs.