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| You can rent or flip a house as a real estate investment |
The Ultimate Guide To Getting Started In Real Estate Investing
If you picture real estate investing in your mind, then you're probably thinking about residential properties. But as a real estate investor, there are a significant number of options available to you when it comes to properties. You can choose to invest in rental properties, or you might even be interested in flipping homes.
Over the past fifty years, the popularity of real estate investing has continued to grow. Real estate is seen as an asset class. If you want your investment portfolio to be diversified, then real estate investments should be a part of it. You can also make money through your real estate investments. One way to do this is by renting out your properties and becoming a landlord. You could even choose to invest in real estate investment trusts. This allows you to invest in real estate without actually needing to own, manage or provide financing for properties.
Why Should You Invest In Real Estate?
If you're wondering about how to get involved in real estate investing, then the question of why you should do so might have crossed your mind. With real estate investments, you can enhance your portfolio's profile of risk and returns. The returns you get through real estate investments are competitive and risk-adjusted. Usually, the markets in the real estate industry are low in volatility. This is especially seen when you compare real estate investing to investing in bonds and equities.
If you're looking for an attractive way to see a return on your investments, then real estate investing can be perfect for you. There is also a great potential for diversifying your investment portfolio as well. Real estate doesn't have a positive correlation with asset classes viewed as major. As a result, when stocks are going down, this doesn't really affect real estate. In fact, real estate can start to go up.
To add real estate to your portfolio, you can purchase properties directly. You can also invest in real estate investment trusts, or you can also invest in a fund that, in turn, invests in REITs. These days, it's possible for you to explore potential properties through virtual meetings. Learn how to have a successful virtual meeting and start viewing potential properties online.
The Inflation Hedging Properties Of Real Estate Investments
Generally, the price of a property will increase when there is inflation. This is as the costs of a homebuilder will also rise during a period of inflation. This rise in costs will then be reflected in the prices, which the new homeowners will be expected to pay. The costs of properties that are already built will also go up during a time of inflation.
Say you have a mortgage that is a fixed rate. This means that when there's inflation, the monthly payments that are fixed end up becoming more affordable to you. In case you're a landlord, you can also increase your rent during inflation periods.
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How Can You Invest In Real Estate?
The best real estate investment advice you're likely to get is to think carefully about what kind of property you want to invest in. If you want to use creative real estate investing strategies, then invest in more than one kind of property. The options available to you are listed here.
1. Rental Properties
When you choose to invest in properties in the rental market, you turn into a landlord. This is why you'll first need to think about whether you want to become a landlord or not. When you're a landlord, you'll need to pay the mortgage, insurance, as well as property taxes. You'll also need to maintain the property, find tenants, and also deal with potential problems in the property - such as with plumbing or electricity.
You could alternatively employ someone as your property manager who can take care of these for you. But it's more common for landlords to manage their own properties. How you'll be making money is through rent. How much you can charge as rent will depend on where your property is situated. A good strategy is to charge as rent the amount that you'll need to pay as your mortgage. Do this until your mortgage has been paid off. Then, what you charge as rent becomes your profit.
2. Flipping Homes
As a property flipper, you'll be buying properties that you intend to have under your ownership for a short period of time. Usually, you'll own the property for up to four to five months. Then, you'll aim to sell your property at a higher price.
When it comes to property flipping, there are two ways you can approach this. You can either repair and update your property, or you can hold a property that you later want to resell. If you want to repair the property, then ascertain that repairing and updating the property can, in fact, help increase the property value. There's another way you can add properties to your real estate investment plan.
If you notice that the property market is rising rapidly, then invest in a piece of property in that market. Then, hold the property for a few months. After that, you'll be able to sell the property for a higher price. There are some risks that you should know about as well. There's always the chance that you won't be able to sell the property at a higher price. However, if you approach property flipping the right way, then this is a great way to make a decent profit through your investments.
3. Real Estate Investment Trusts
If you're wondering how to be successful in real estate investing without actually managing and owning properties, then consider REITs. This is where investors form a trust, or a corporation, with the aim of selling properties that induce an income. Major exchanges are used to buy as well as sell REITs. In order for an entity to be seen as a REIT, certain qualifications need to be met.
The entity will need to pay 90% of the total taxable profits as dividends to the different shareholders. This enables the REIT to avoid having to pay corporate income taxes. By investing in a REIT, you'll be able to enjoy a regular income. There are also opportunities for appreciation as well. A REIT can invest in more than just residential properties. Many REITs invest in shopping malls, healthcare facilities, office buildings, and more. REITs are also more liquid, especially when compared to other investments in real estate.
What Are Other Options Available To You?
Should you be thinking about how to get involved in real estate investing, then consider real estate investment groups as well. These are similar to mutual funds but for properties on the rental market. In case you want to purchase a rental property but you don't want to become a landlord, then this option could be perfect for you.
You can also choose to be a part of a limited partnership as well when it comes to real estate. This is also an entity that's created to purchase and then hold onto property investment portfolios. Note that limited partnerships like this are formed just for a few years. You can also invest in mutual funds for real estate. These mutual funds go into REITs; as well as, operating companies in the real estate sector. Mutual funds allow you to obtain diversification of exposure to real estate investment opportunities with little capital.
Conclusion
Create a great real estate investment business plan that enables you to make a profit in the long run. Successful real estate investors know how to invest in properties that they can resell at a higher price. If you want to be more hands-on with your properties, then you could choose to become a landlord as well. Should you not want to be involved in managing the property, then choose to invest in real estate investment trusts, mutual funds, limited partnerships, and more. Use the creative real estate investing strategies in this guide to build a great real estate investment portfolio today.
Related: Easy Steps To Start Note Investing
Author: Henrietta has studied finance and has been helping people with making investments for over a decade. She writes a blog on how to make investments, gives talks, and acts as a financial consultant at many top corporate houses. She specializes in helping clients make real estate investments.
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