Real estate is a long-acknowledged excellent investment option. It combines the advantage of high return potential plus the chance of diversifying your portfolio, shielding owners ahead of harsh economic seasons. However, what’s the best way to invest in the real estate industry?
There’s no correct single answer. You want to check out the best investment options available and conclude what best fits your unique situations. There are different ways of diving into the real estate pool, each having a unique blend of capital needs, investment dynamics, and liabilities. Following is a list of the best six real estate investment ideas out there.
Join a Real Estate Syndication or Crowdfunding Group
Here’s another very excellent option for potential investors asking about how to invest in a rental property. The rapidly growing crowdfunding market is a more recent real estate investment option. It typically starts with a real estate developer identifying an investment opportunity, usually commercial property, they intend to hold.
Here, the developer often has the task of restructuring the property’s debt or completely overhauling it. Moreover, this task usually includes a target closing date when the developer hopes to sell or refinance the facility. Towards this set goal, the developer raises funds from the public in exchange for an equity interest in the said project.
All across the real estate market are crowdfunding and syndication platforms that act as intermediaries between real estate developers and public investors. Such platforms help verify the legitimacy of the investments and ensure that they meet industry quality standards.
Per their advantages, real estate Syndication and crowdfunding has a potentially huge return potential, with some outlets reporting up to 15 percent profit. They also allow intending investors to diversify their investment strategy, leveraging the developer’s competence and experience.
There are a few things that should incite some caution, however, with crowdfunding investment options. Often, a higher reward potential brings a higher risk potential, which applies to crowdfunding. Also, it’s very challenging to pull out of any syndication investments in real estate before the property has sold. In summary, while crowdfunding and syndication makes an excellent investment option, it’d help to be well informed before diving into it. If you’re considering various investment options, it’s essential to explore real estate Syndication and crowdfunding as well, as they can offer unique opportunities for real estate note buyers.
Purchase a Rental Home
The most popular means of becoming a real estate investor is buying a rental property. “Investment property” refers to a residential or commercial facility you intend to rent out to tenants.
Buying a rental property has always been a great way to invest in real estate while growing your wealth and generating continuous cash flow. Thanks to a blend of income, equity appreciation, and the usage of leverage when purchasing a real estate property.
However, few things often deter potential investors from this real estate investment idea. One, commercial or residential properties could be very costly and mortgage lenders could ask for as much as a 25 percent down payment. Other drawbacks include the uncertainty around vacancies and potential building damage. Then, it takes real time commitment to manage a rental property effectively.
It is worth keeping in mind, however, the benefit that selling your mortgage note can have if you own a rental property that is still mortgaged. By selling your mortgage note to real estate note buyers, you can free up cash from the investment, diversify your capital, and mitigate risk. This can be a less traditional way to keep your capital moving.
Fix and Flip a Home
Fix-and-flip properties refer to homes investors purchase with the singular aim of repairing them and reselling to make a profit. Home flipping has become much more popular in the mainstream media today, thanks to several TV shows displaying home flipping activities. In reality, flipping houses could fetch the executors lots of cash flow in the best possible case scenarios.
Note that flipping properties are as engaging as 9-5 jobs, if not more. That is, if you intend to invest passively in real estate, then this option is likely not for you.
Moreover, even with the most competent real estate professionals, flipping properties could be quite risky. It’d help if you consulted a real estate investment advisor like those in peoplescapitalgroup.com before delving into this investment idea.
Own a Short Term or Vacation Rental Property
A vacation or short-term rental property is different from a long-term rental property in some ways. First, vacation property owners can live in them during vacant seasons.
It’s also reasonably easier to get finance for a short-term rental, particularly if it qualifies as a “second home” with your mortgage provider. Lastly, short-term property investment in real estate tends to provide more income each rented day than a long-term rental home.
Conversely, owning a vacation rental has its cautious grounds. Marketing and managing requirements are more intense in short-term rentals than longer-term properties.
These make managing vacation rentals much more expensive than a long-term property. Also, short-term rental property owners sometimes need a special license to operate, which could be very expensive.
Real Estate Investment Trusts (REITs) is one of the best place to invest in real estate. REITs are specialized firms that operate, own, manage, or otherwise earn their revenue from real estate properties. Check out this article to have an overview of REITs, especially those in Singapore, and learn how to know which REITs to invest and which ones not to.
Several REITs are on the stock markets. So, you can buy from them from the comfort of your home. Moreover, many real estate investment trusts have little starting capital to create space for unaccredited investors.
Other investment options in this category include real estate mutual funds and exchange-traded funds (ETFs). However, some real estate shares don’t qualify as real estate investment trusts. You may also invest in the real estate stock market through listed homebuilders and land developers.
Become a Mortgage Lender
One of the least popular real estate investment methods is to provide debt. There’s no need to incorporate a “mega” mortgage company or even directly lend to someone.
Several platforms allow you to diversify into a real estate debt portfolio. Among such platforms are crowdfunding platforms, where people can lend towards a property project.
One of the benefits of being a debt investor in crowdfunding, for instance, is that the debtor has more claims to the project. If the project turns south, debt investors receive their money back before equity investors.
That is, debt investors are generally lower-risk investments. However, they’re not as potentially yielding as owning an equity in the event of a massive profit on the property.
Conclusion
By now, you’ve discovered how to invest in real estate investments with each method’s benefits and drawback(s). However, there’s no crime in combining two or more of the above real estate investment ideas. In fact, for most people, the best way to invest in real estate is to combine a few available investment ideas.
There’s no hard-and-fast rule or “perfect” real estate investment option. Of course, the best thing to do is figure out what’s best for your situation and invest wisely based on your findings.
