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What are the best ways to invest in real estate?
Real estate investment can be a powerful platform to diversify your portfolio. Since it isn’t as volatile as the stock market, many investors consider it more stable. The reason is that you don’t have to worry about its value changing daily.
Instead, it can appreciate over time.
While it can be a haven to invest in, it’d be best to understand your target market to take advantage of price appreciation. Otherwise, it may tie up your capital for more extended periods than expected.
For instance, you stay on the United States’s east coast and want to invest in one of the western states like Utah.
Understanding the Utah Real Estate Market and its behavior throughout the year would be best. This can help you make an informed decision. You can research the best time to buy and when to sell a property in the state.
Additionally, you should also know what locations have more demand.
Real estate can bring significant returns if you play your cards right. Below are some of the best ways to invest in real estate.
Best Ways To Invest In Real Estate
1. Consider Rental Property Investment
Purchasing property with the intent to rent it out is another investment option you can take. Rental properties can offer you a constant flow of income.
Furthermore, the property appreciates over time. Thus, you can decide to sell it after you break even. It’s crucial to note that this is a long-term investment.
You can rent your property with short-term or long-term rental options. Short-term can be on a nightly or weekly basis. On the other hand, a long-term lease requires a minimum of one year. Such options make rental properties a good flow of profits.
However, it can require considerable input on your part—for instance, building maintenance and tenant screening. You can outsource this to a property management firm, which means your returns will also be reduced.
2. Think About Property Flipping
House flipping is one of the investment strategies that real estate investors commonly term a high-risk strategy. Even though you may get significant returns, you should be ready to take on more risk than other investment avenues.
This investment option involves buying a low-priced property. After that, you can carry out renovations and facelifts to increase its value. You can then hold on to the property until you get a reasonable market price, then sell it.
However, there’s no guarantee in this investment strategy.
First, you need to ensure the property’s renovations aren’t significant. Otherwise, you may spend more than you can get back.
Second, it’s not always guaranteed that you’ll get the selling price you expect. Thus, it requires extensive research on current and anticipated market trends.
For instance, you can buy property in expanding neighborhoods. The property can also be near planned mega projects. With this in mind, you can hold on to the property until its value is significantly appreciated.
It’s vital to remember that projections may not always materialize. Thus, you may not manage to recoup your renovation and acquisition costs. In addition, property flipping would require you to have enough cash to cover repair costs.
However, the top side is that flipping can give you better returns within a shorter period.
3. Join Online Real Estate Platforms
Also known as real estate crowdfunding, these online platforms provide you with an opportunity to pool resources with like-minded investors. Additionally, these platforms provide a connection between investors and real estate developers. These platforms offer you an option to diversify your investment portfolio significantly.
It’s also essential to note that this real estate investment option has eligibility restrictions. Some might require proof that you’re an accredited investor, while others don’t need this. Some also have an investment minimum of as little as USD$500.00.
Your distributable income can range from 10% upwards, depending on the platform. However, you should know the management fees each crowdfund charges to enable you to make the right investment decision.
4. Buy Into Real Estate Investment Trusts
If you’re a real estate investor who wants minimal risk exposure, the real estate investment trust (REITs) can be your best option. REITs operate similarly to mutual funds.
Thus, you can buy stocks or shares of REITs firms with investments in various income-generating properties. In most cases, REITs mainly focus on office parks, warehouses, commercial buildings, and shopping malls.
You can get REITs shares on stock exchanges. However, some REITs firms may not be publicly listed but still offer shares to individuals. Seasoned investors recommend buying into public-listed REITs as you can easily research them. Your local brokerage firm can help facilitate your investment in REITs firms.
REITs companies are legally required to pay out about 90% of their profits. In addition, REITs in most locations carry a pass-through entity structure. Thus, they aren’t subject to corporate tax like other listed companies.
These two combinations, therefore, mean dividend earnings from REIT companies are significantly higher, making them an ideal real estate investment option.
Real estate investment can be a lucrative venture. Following these best ways to invest in real estate, you can easily start this venture. However, it’s crucial to understand the risks involved.
Thus, it’d be best to conduct thorough background research as you consider which option to take.