Real estate investments are a great way to diversify your portfolio. It’s also easy to get into the market.
You probably haven’t ever been a landlord. It’s not glamorous to be a landlord.
Real estate investing can still be profitable if done correctly, even though we have moved to higher interest rates. Real estate investing can help diversify an existing investment portfolio as well as provide additional income streams. Many of the best real estate investments do not require you to be available at every tenant’s request.
Many new investors aren’t sure where or how to invest. These are the top ways to make money with real estate. They range from low-maintenance to high-maintenance.
The best ways to invest in property
- Buy REITs (real estate investment trusts)
REITs let you invest in real property without having to own the actual real estate. They are often compared to mutual funds. They own commercial real property such as offices, retail space, apartments, and hotels. High dividends are a common way to invest in REITs for retirement. Investors who do not need or desire regular income can automatically reinvest the dividends to increase their investment.
Are REITs a good way to invest? While they may be a good investment, they can also be complex and varied. Some are traded on an exchange just like stocks, while others aren’t. Non-traded REITs can be difficult to value and are not easily sold. You should stick with publicly traded REITs that you can buy through brokerage companies.
You will need a brokerage account to do this. Opening a brokerage account takes just 15 minutes. Many companies do not require an initial investment. However, the REIT will likely require a minimum investment.
A fund with interests in multiple REITs can give you exposure to more real estate investments. This could be done through an ETF or by investing in mutual funds that hold shares of multiple REITs.
- Make use of an online platform for real estate investing.
Real estate investment platforms link real estate developers with investors looking to finance projects through equity or debt. In return for taking on significant risk and paying a fee, investors can expect to receive quarterly or monthly distributions. These distributions, like many real estate investments, are speculative. They can’t be unloaded the same way as stocks.
You may need to have money in order to make it. These platforms are only open to accredited investors. This is defined by the Securities and Exchange Commission at $200,000 per year (or $300,000 for a spouse) or a net worth of at least $1 million, not including a primary home. RealtyMogul is an alternative for those who don’t meet this requirement.
- You might consider renting a property.
Tiffany Alexy, 21, didn’t plan to become a real estate investor when she purchased her first rental property. She was a Raleigh college senior at the time. She planned to attend graduate school in Raleigh and thought buying would be more convenient than renting.
I found a condo with four bedrooms and four bathrooms that was student-housing-style on Craigslist. Alexy says that she bought the condo, lived in one of its bedrooms, and then rented the rest to others.
The set-up covered all her expenses and earned Alexy an additional $100 per month in cash. This is a lot for a graduate student, and enough to get Alexy hooked on real estate.
Alexy used a strategy known as house hacking to enter the market. This term was created by BiggerPockets (an online resource for real estate investors) and is sometimes called house hacking. This basically means that you are renting out your investment property. Alexy used it to rent out her rooms. David Meyer, vice-president of data and analysis at the site, said that house hacking allows investors to buy properties with up four units and still be eligible for a residential mortgage.
You can rent out entire investment properties. You should look for one that has combined expenses less than what you can rent. You will also need to pay a property management fee if you don’t want to be the one who arrives with a toolbelt to fix the leak or the person who calls that person.
Meyer says, «If you manage it yourself, you’ll learn much about the industry, and if it’s your turn to buy future properties, you’ll have more experience.»
- Flipping investment properties is an option.
This is HGTV at its best: You buy a home that’s too expensive, give it a few repairs and then resell it to make a profit. The strategy, house flipping, is more difficult than it appears on TV. Due to the rising cost of materials and higher mortgage interest rates, it’s also more costly than it was in the past. Many house flippers want to buy the houses in cash.
Meyer says that there is more risk because flipping houses requires an accurate estimation of what repairs will cost. This is difficult.
His advice? Find an experienced partner. He says, «Maybe you don’t have the capital or time, but find someone who can estimate expenses and manage the project.»
Flipping comes with the risk that you will lose income. You may have to pay a mortgage, but you could also lose your home. Living in the house while you renovate it can reduce that risk. As long as the changes are minimal and dust is not an issue, this method works.
- Let a room go
You could also rent a portion of your home to get a taste of the real estate market. This arrangement can significantly lower housing costs and allow people to remain in their homes while still gaining from the property’s price appreciation.
Younger people may find it easier to pay a mortgage if they have roommates. If you aren’t sure you’re ready to move in, you might consider Airbnb. This is house hacking for those who aren’t ready to commit. Potential renters are prescreened by Airbnb, and their host guarantee protects against damage.
It’s much easier to rent a room than it is to invest in real estate. You can rent a room if you have a spare one.
As with all investments, the best real estate investments will be those that are most beneficial to you as the investor. Consider how much time and capital you are willing to invest, as well as whether you would like to manage household problems when they arise. You might consider investing in real property through a REIT, crowdfunding platform, or other means if you lack DIY skills.