You don’t hear too much about it anymore, but it poses serious income potential.
It’s riskier than stock investing, but the reward is greater!
In this article, I’m going to cover some basics of real estate investing and how any “joe-smo” can get started.
Renting Out a Property
This is the first thing that most people think about when they hear the words “real estate investing.” It’s a pretty simple concept. Say, you, the landlord purchase an investment property and rent it out to a tenant.
Your goal is to cover all your maintenance costs, taxes, and mortgage and still turn a profit. This is where your risk lies. If you’re not making money, it becomes a sour investment.
You are the owner of the rental property, so all the typical responsibilities that come with home ownership fall right into your lap. If that gas heater breaks, guess who’s paying for it? You are! If you are comfortable with taking on the risk of home ownership, then physical property investments is the way to go.
Once you finish all the required research and hand pick your tenants, owning a couple real estate properties can be quite lucrative.
Spread the Risk: Join a Real Estate Investment Group
If becoming a landlord doesn’t sound like your cup of tea, then joining a real estate investment group might be right up your alley. Typically, a large company will build a brand new apartment or multi-family community then will sell the newly built properties to investors.
The beauty of this is that you can choose to purchase multiple apartments or you can buy a single unit. For a small fee, the company you buy the apartment from will manage all maintenance and interviewing and selecting tenants.
This can be a lot of work, so outsourcing to a company is a great option to have. Just like property rentals, research is huge and asking around for references will save you some headaches in the long term.
Go Basic: Invest in REIT’s
If you’re still not interested in the above two options, there is a completely hands off approach to real estate investing. This is where Wall Street comes in. For the average, “hands-off” investor, Wall Street created an investment vehicle called REIT’s.
REIT stands for real estate investment trust. Putting it simply, an REIT is created when a corporation or group of companies use money from investors and invest in real estate properties.
With the investor’s money, these companies purchase and maintain rental properties with the goal of increasing the stock price for shareholders. This is a great option for anyone who wants to place the burden of rental property ownership on someone else.
Another cool thing that REIT’s offer is the option of investing in commercial properties, not just residential. This is great for anyone looking to diversify their income.
As you can see, there are many ways to invest in real estate. As I wrote this article, I realized that I have great interest in the real estate investment market.
If you’re like me and want to diversify income sources, real estate investments are a no-brainer. With the proper research, networking, and a little bit of patience, real estate investing can be extremely profitable.
Are you currently investing in real estate? How?
Photo by lumaxart