Several successful private investors often include real estate investment into their investing strategies. They view real estate as a means of diversifying their portfolio to rely less on common bonds and stocks, which are usually driven by public market fluctuations.
Real estate, a tangible asset, possesses long-term values that are often driven by the property’s location and attendant supply and demand. Similarly, it’s also influenced by any physical upgrade to the property and the changing demographics of the property site.
With the bonds and the stock market becoming more volatile, lots of investors are turning to hard assets like real estate as a means of shielding themselves from the stock market crises.
So if you’re part of those asking how much money to invest in real estate, the answer lies in the type of real estate property you wish to begin your investment journey.
Which Real Estate Property Should You Choose?
Most investors have different opinions on what’s to be considered the ideal real estate property investment. While some believe it’s cheaper and more convenient to invest in residential real estate like single-family homes, others believe apartment buildings are the best, although they’re expensive.
With the continuous increase in the real estate market, investors are often considering which of the available property types will offer them more profit when invested. Therefore, the question is, which real estate property should a new investor choose? Keep reading to discover which real estate investment type to consider.
Residential Real Estate Investing
The first picture the word real estate always creates in our mind is a residential single-family home. According to HousingWire, the average down payment you can pay for a house in the country is $15,000. If you can afford a rental property’s down payment, consider investing in it as it’s a worthwhile investment.
You might have heard of the term flipping houses. It’s a popular real estate term that entails purchasing, renovating, and selling residential real estate properties. Flipping houses are beneficial to those investors looking to engage in hands-on projects.
However, flipping houses isn’t an easy venture and transcends acquiring and selling homes. Being a landlord comes with numerous responsibilities; thus, residential real estate investment might not be a suitable option for all investors because of the complexity, energy, and time involved.
Commercial Real Estate
The term commercial real estate entails every property that’s not a duplex or single-family home. Commercial real estate includes retail stores, medical offices, apartments, condominiums, office buildings, shopping malls, factories, etcetera.
Being the more expensive option, commercial real estate requires enormous capital to start. However, investing in it is presently more affordable than most people think.
Investors can now come together under a crowdfunding platform to pool their various funds together and finance a commercial real estate project. Depending on the project, you might begin with $25,000 or less. This option is suitable for people looking for how to invest in real estate with little money.
Other Real Estate Investment Options
Besides direct investment in buying either a residential or commercial real estate property, an investor can choose other available real estate investment options. Some of them include:
Created over half a decade ago to allow private investors to engage in the commercial real estate market, REIT offers an easy and cheap option for increasing and diversifying the investor’s investment portfolio using real estate.
Real estate investment trusts (REITs) are often securities traded like stocks on the principal exchange markets. An investor using this method directly invests in real estate either through mortgage investments or property purchases. This real estate investment option is ideal for people looking for how to invest in real estate stocks.
However, lots of REITs focus on a specific real estate type or in a certain region.
A real estate investment trust provides an investor with a high dividend while offering a real estate high liquid method investing.
While it’s true that most real estate investment is difficult to make fast money from, an exchange-traded REIT generates more profit.
Consider starting small with an insignificant amount. However, if you’re planning to invest in a REIT for a long time, you can go for one that provides a dividend reinvestment plan, popularly called DRIP.
Investors interested in owning the physical real estate rather than a company’s shares can opt for a private partnership or REIG.
One of the smart ways to invest in real estate, a real estate investment group (REIG) is one that allows an investor to buy one or more condominium or apartment units through the building’s operating company.
The property’s operating company is in charge of collectively managing all the units, besides marketing them too, in exchange for taking a small percentage of the rent tenants to pay monthly.
One advantage of the real estate investment group (REIG) is that you won’t have to worry about the property management and the problems landlords face. Additionally, it’s a cost-effective method investors can use to penetrate the real estate market.
Joining a partnership will ensure an individual with a small number of funds can be a real estate investor. Members of the partnership pool together fund to get a property which will be co-owned and shared. Depending on the investor’s financial capacity, the investment fund could be as little as $5,000 or as big as $50,000. The aim is to join an REIG, with a monthly cash return offering on your real estate investment.
Over time, seasoned financial investors have always regarded real estate investment as an effective method of achieving financial independence. The major reasons are because of the fantastic tax breaks and great returns.
Although profit in investment is never guaranteed, real estate investing is a tested wealth-building strategy for financial growth. You don’t need to wait till you make millions; you can start small and grow into other real estate investment options.
But before you begin, you have to decide on how much you’ll set apart for the venture. However, this act will depend on your financial and emotional comfort level.
While you can’t control every investment outcome, you owe it to yourself to research and give much thought to it before making a decision. The higher the risk in investments, the higher the profits. However, ensure to take the risks your heart can carry.