How to Invest Money in Real Estate
Today, real estate investing has plenty of options for individual investors, along with the reasons to invest. So, when it comes to choosing the best investment vehicle, you’ll have to consider lots of variants, including even not physical properties.
Real estate has acquired its popularity over the last 50 years or so and is still attractive when compared with more traditional sources of income. Somehow, it reminds of the popularity of car rental options today – everyone can choose the best variant for him- or herself. Thus, car rental 8 Denver airport is one of such options.
However, when thinking of getting involved in real estate investing you should remember that it is typically a long-term game. Thus, being high today, rates can fall tomorrow, so you can simply use this time to accumulate cash for a down payment while waiting.
Why to Invest in Real Estate?
There’s a sound reason to consider real estate a perfect investment. It can enhance the risk-and-return profile of an investor’s portfolio, offering competitive risk-adjusted returns. Compared to equities and bonds, the real estate market is much more stable, as an asset that’s subject to different influences than stocks and bonds.
Real estate can easily become a lucrative investment for almost everybody. Although it requires quite a lot of time, patience and finance, it may be more accessible than you think. Real estate offers both income — in the form of rents and appreciation — when you get profit selling appreciated property. So, if you decide to invest in real estate, you should know the main strategies for adding real estate exposure to your investments.
Purchase your own home
Though many people do not normally think of their first residence as an investment, it may become one of the best ways to invest in real estate and get lots of benefits. Living in your own home, you are free from the monthly rental payments, which seem to rise year after year. This way some amount of your monthly mortgage goes into your own pocket. Besides, you’ll have much better relationships with banks, as they treat house owners more favorably. You’ll be given a lower mortgage rate or can get a lower down payment as an owner-occupied property if needed.
However, mind that investing in your own home is perfect for you, if you’re planning to stay in an area long-term and aren’t planning to build wealth immediately. Average annual returns might be less than you expect. In accordance with a report from industry analyst Black Knight for the period 1994 – 2019, homes’ value only increased by less than 4% annually.
Buy REITs (real estate investment trusts)
REIT is one of the passive ways to invest in real estate without the physical real estate. Buying a real estate investment trust, you can get the returns of real estate with the liquidity and relative simplicity of owning a stock
There’s much in common between mutual funds and REITs. They’re companies which possess retail spaces, office buildings, apartments, hotels and other commercial real estate. Real estate investment trusts tend to pay high dividends to their investors. Thus, if you don’t need to get your regular income you can automatically reinvest it.
REITs can be a good investment, but they can also be varied and complex. So, purchasing the REIT, pay attention to its type, which can be a big factor in the amount of risk you’re taking on.
Rental Properties Investments
Purchasing rental properties is a good variant for those, who’re looking to make a major commitment to investing in real estate. Rentals belong to the most labor-intensive methods of real estate investments. Nevertheless, it can provide steady cash flow and the possibility of appreciation over time. Today lots of people prefer to rent accommodation as well as rent a car. So, both cars for rent and investing in real estate with rental properties offer great profit potential, but also may arise numerous problems you’ll have to solve.
Flipping properties is one of the common real estate investing strategies. It involves renovation and construction of homes, thus takes lots of work. It means that you’ll have to take on extra risk and high financial expenses.
Mind that home flipping strategy implies building permits for renovations. Besides, remodeling costs may exceed your expectations.
Investing in real estate can guarantee long-term returns that are not entirely correlated with the stock market. But, investing in physical property is ready for high costs and risks. Considering this, REITs can become the best option for the people who aren’t looking for a primary residence or are limited in cash to invest.
Purchasing rental properties or starting flipping homes, be aware of the risks you’re taking and make sure you have a plan on earning your investments back. Otherwise, real estate can become a big financial commitment for you.