3 Ways to Invest in Real Estate

Investing in real estate is a lucrative and highly beneficial investment strategy that can provide you with satisfying results. With real estate investments, you can use leverage to buy an investment property by only paying a small amount of the upfront cost. You can then pay off the remaining balance in time, plus interest.

Contrary to typical purchases that require 20%-25% down payment, in most cases, you are only required to pay a 5% down payment. That is all it takes to purchase your property. Real estate is perhaps one of the easiest ways to get into investing and it also adds diversity to your portfolio and can be as simple as buying a mutual fund.

Being a landlord isn’t something people usually dream of. Every day calls about plumbing, and electricity issues aren’t the most glamorous things in the world. However, done right, it can be a fantastic way to enhance your income stream.

The only real trouble that comes along with investing in real estate is the fact that most of the time, people don’t know where to start. That is where we come in to help you out.

1. House Flipping

Though it isn’t the first route you should take, it is a popular one. House flipping is definitely one for the more experienced real estate investors due to the capabilities required. House flipping requires you to be able to oversee or complete the repairs required and it also requires capital.

In less than six months the real estate flippers look to sell their undervalued property for a higher price than it was purchased and will usually avoid investing in properties that need significant repairs. This means that the property will need to have the intrinsic value that is needed to turn a worthwhile profit.

When it comes to the real estate flipper being unable to promptly flip a property, troubles begin to arise. It is highly unlikely that flippers have extra money to pay a long-term mortgage on top of their own. This can lead to severe losses.

If you are in it for the long term, some flippers like to purchase reasonably priced properties and provide them with renovations which will add more value. It is important to remember that these types of flips are longer-term and will only allow you to do 1-2 properties at a time.

2. Real Estate Investment Trusts (REITs)

Here is where it becomes slightly different. REITs essentially allow you to invest in real estate without the actual physical real estate. They are created when corporations or trusts use the money of investors to be able to purchase/operate income properties. Like any other stock, REITs are bought and sold on the major exchanges.

REITs are great for avoiding paying corporate income tax due to the fact that they require a corporation to payout 90% of its taxable profits in dividends to be able to retain its REITs status. When deciding to look into REITs, it is highly important that investors distinguish between equity REITs (the ones that own buildings), and mortgage REITs (the ones that provide financing for real estate).

Because of the fact that REITs are exchange-traded, it also means that they are highly liquid. In simpler terms, this means that you will not need a realtor or title transfer in order to cash out your investment.

3. Online Real Estate Platforms

If you’re interested in a bigger commercial or residential deal, real estate investing platforms are what you’ve been looking for. Your investment is done online through online real estate platforms, also known as real estate crowdfunding. Though it still requires capital, it is less than what is needed to purchase properties outright.

For more help with real estate crowdfunding, check out Fundrise. It is a real estate crowdfunding platform that makes it incredibly simple and straightforward to begin investing in real estate. Another option is Roofstock, a low-cost investing platform that can aid you in your real estate investing journey.

As with any type of investment, whether the market is up or down, there is always profit and potential in the real estate investing sector. In most cases, it is highly possible to diversify your investments without outlaying too much money.

Jeremy Biberdorf: Jeremy Biberdorf is a long time internet marketing professional turned full-time online entrepreneur and blogger. Check out his site modestmoney.com for investing advice and reviews of the best investing platforms such as M1 Finance and SoFi.
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