5 Easy Ways to Invest in Real Estate

Abbie Ackerly
June 07, 2021
real estate ways to invest

An investment approach that can be both rewarding and profitable is to purchase and own real estate. A few tips and tricks are explained here today, we have done the research and listed the 5 easy ways to invest in real estate today. Future real estate owners can use leverage to purchase a house, unlike stock and bondholders, by paying a portion of the overall cost in advance, then paying off the remainder, plus interest, over time. While a typical mortgage usually includes a down payment of 20 to 25 percent, a down payment of 5 percent is what it takes to buy an entire property in some cases. This desire to manage the asset after contracts are signed emboldens both real estate flippers and tenants, who can, in essence, take out second mortgages on their homes to allow additional property down payments. Here are five main ways that investors can make real estate money. What are the 5 Easy Ways to Invest in Real Estate Today?

Key Takeaways – 5 Easy Ways to Invest in Real Estate in 2021

  • Using leverage, aspiring real estate owners can purchase a house, pay a portion of its overall cost upfront, and pay off the remainder over time.
  • One of the primary ways in which developers will make real estate cash is to become a rental property landlord.
  • People who are flippers can also gain income by buying undervalued real estate, fixing it up, and selling it.
  • Investment groups in real estate are a more hands-off form of making real estate money.
  • Real estate investment trusts (REITs) are simply securities paying dividends.

1. Assets for leasing

It can be a perfect opportunity for individuals with do-it-yourself (DIY) and renovation expertise to own rental properties and have the patience to handle tenants. However to fund up-front maintenance costs and to cover empty months, this approach needs considerable resources.

Pros

  • Provides periodic income and can appreciate assets
  • Maximizes wealth by exploiting
  • Numerous associated tax-deductible expenditures

Cons

  • Managing tenants can be boring.
  • Land possibly damaged by tenants
  • Reduced earnings from possible vacancies

In the U.S., according to Sales prices of new homes (a rough measure of real estate values) gradually rose in value from 1940 to 2006, until decreasing during the financial crisis, according to the Census Bureau. Sales rates subsequently resumed their increase, also surpassing pre-crisis levels.1 2 It remains to be seen what the long-term impact on real estate values of the coronavirus pandemic would be.

Annual rate for new homes sold in US from 1963 to 2019
Source: Survey of Construction, U.S. Census Bureau

2. Investing Parties in Real Estate (REIGs)

Real estate investment groups (REIGs) are perfect without the hassles of running it for individuals who choose to buy rental real estate. A capital buffer and access to financing are needed to invest in REIGs.

Small mutual funds invested in rental properties are like REIGs. A firm buys or builds a series of apartment blocks or condos in a traditional real estate investment group, then allows investors to buy them through the company, thereby entering the group.

A single investor may own one or more units of self-contained living space, but all the units, maintenance handling, advertising vacancies, and interviewing tenants are collectively handled by the company running the investment community. The business takes a portion of the monthly rent in return for performing these management activities.

In the name of the investor, a typical real estate investment group lease is, and all the units pool a portion of the rent to protect against occasional vacancies. To this end, even if your unit is empty, you will earn some revenue. As long as the vacancy rate does not rise too high for the pooled units, it should be enough to cover costs.

Pros

  • More hands-off than rental ownership
  • Offers sales and recognition

Cons

  • Risks linked to vacancies
  • Similar charges for mutual funds
  • Susceptible to administrators lacking scruples

3. Flipping house

House flipping is for individuals with extensive expertise in the appraisal, marketing, and restoration of real estate. House flipping requires capital and the willingness, if necessary, to do or supervise repairs.

This is the proverbial wild side’ of investing in real estate. Real estate flippers are distinct from buy-and-rent landlords, just as day trading is separate from buy-and-hold investors. Real estate flippers also look to profitably sell the undervalued assets they purchase in less than six months as a case in point.

Simple property flippers also do not invest in property enhancement. Therefore in order to turn a profit without any changes, the investment must already have the intrinsic value required or they would remove the property from contention.

Flippers who are unable to unload a property quickly can find themselves in trouble because they usually do not keep enough uncommitted cash on hand to pay for the long-term mortgage on a property. This can lead to continuing losses from snowballing.

There is another kind of flipper that makes cash by purchasing properties that are moderately priced and adding value by renovating them. This can be a longer-term investment in which investors can only afford to take on one or two assets at a time.

Pros

  • Links up money for a shorter period of time
  • Might deliver rapid returns

Cons

  • Needs deeper business understanding
  • Hot markets are suddenly cooling

4. Trusts for Real Estate Transactions (REITs)

For investors seeking portfolio exposure to real estate without a conventional real estate deal, a real estate investment trust (REIT) is better.

A REIT is created when a business (or trust) uses the money of investors to buy and manage revenue assets. Like any other stock, REITs are bought and sold on major exchanges. 3

To retain its REIT status, a company must pay 90 percent of its taxable income in the form of dividends. REITs avoid paying corporate income tax by doing so while a normal corporation will be taxed on its earnings and then have to determine whether to allocate its after-tax profits as dividends or not.

REITs are like traditional dividend-paying stocks, a solid investment for investors in the stock market who want regular dividends. REITs allow investors to venture into non-residential investments, such as malls or office buildings, as opposed to the aforementioned forms of investment in real estate, which are typically not feasible for individual investors to buy directly.

More specifically, since they are exchange-traded, REITs are extremely liquid. In other terms, to assist you with cashing out your investment, you won’t need a realtor and a title transfer. REITs are a more formalized version of a real estate investment group in operation.

Finally, investors should differentiate between equity REITs that own properties, and mortgage REITs that provide real estate finance and dabble in mortgage-backed securities (MBS) when looking at REITs. Both give real estate exposure, but the essence of the exposure is distinct. Equity REITs are more common in that they reflect real estate ownership, while mortgage REITs rely on mortgage lending income for real estate.

Pros

  • Basically, dividend-paying shares
  • Core holdings tend to be cash-producing, long-term leases

Cons

  • Orthodox rental property leverage does not extend to

5. Real Estate Websites Online

Platforms for investing in real estate are for those who want to join others in investing in a broader trade or residential contract. The investment is done through online real estate sites, also known as crowdfunding for real estate. It also needs capital investment, but less than what is needed to buy the property outright.

Online platforms bind investors with real estate developers who are looking to fund projects. In certain circumstances, with not much capital, you can diversify your assets.

Pros

  • Can be invested in discrete projects or project portfolios
  • Diversification of Geography

Cons

  • Tends to be illiquid with times of lockup
  • Fees for administration
  • About the bottom line

Conclusion 5 Easy Ways to Invest in Real Estate

These were the 5 ways to invest in real estate today. Whether real estate investors use their properties to produce rental income or to bid their time before the ideal sale opportunity occurs, by paying a relatively small part of the total value of a property upfront, it is possible to create a robust investment program. As with any investment, whether the overall market is up or down, there is benefit and potential in real estate. Start investing today.


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