How Do You Invest in Real Estate?


Real estate represents a solid investment opportunity for anyone willing to do the

work. Its resilience against short-term market volatility and the fact that it’s tangible

are just a few of the reasons people choose to add real estate investments to their

wealth-building plans.

Learn how to invest in real estate with these beginner-friendly strategies and tips.



For many investors, home ownership represents the pinnacle of investment success.

Unlike stocks or bonds, real estate is a tangible asset that can be touched and stood

upon. But investing in a property isn’t without risk and responsibilities.

Investing in residential rental properties is typically hands-on for most investors, but

larger-scale portfolios can be managed by a company or an individual with a lot of

cash on hand. Investors should make sure that the company managing the

investment has little debt and enough money in reserve to cover maintenance

expenses and vacancy rates. Read more


Renting out a space in your own house or an extra room can help you gauge

whether or not you want to add landlord duties to your portfolio of investments. But,

be sure to avoid going into debt and consider investing in a property that can

provide an inflation hedge by rapidly adjusting rents when prices rise. Also, be sure

to diversify your portfolio with other types of investments.


Rental Properties

Investing in rental properties may seem like the dream path for people looking to

reach financial independence. After all, real estate typically appreciates in value

over time, whether the market is up or down.

If you’re thinking about investing in rental property, a knowledgeable advisor could

help you make a plan that fits your goals and financial situation. SmartAsset’s free

tool matches you with up to three advisors who serve your area and you can

interview them at no cost to decide which one is right for you.


Before you buy a rental, it’s important to consider upfront costs and operating

expenses that can eat into your potential returns. To find out if you can earn enough

from your investment to cover these expenses, use an online calculator that factors

in things like mortgage payments, taxes and maintenance fees. Also, remember

that being a landlord isn’t always easy. You may have to deal with late renters and

field calls about broken toilets or oversize bugs.


Commercial Properties

When it comes to investing in real estate, many people think first of buying a home.

But there are many other ways to get involved, including commercial properties and

REITs (real estate investment trusts).

Some people choose to start with a few small residential rental properties, such as a

duplex or a couple of single-family homes. These are a great way to get a feel for the

business of being a landlord, such as choosing renters and handling evictions.


Investors also purchase office buildings, warehouses and storage units to generate

rental income or profits from the businesses associated with them. Commercial real

estate investments tend to be more complicated than buying a home, so they

require more due diligence and expertise. This can include research, site visits,

property inspections and a feasibility study. However, the long-term benefits of

commercial properties can be worth the extra work. This type of investing can help

you build generational wealth, diversify your portfolio and earn passive income.


Real Estate Investment Trusts (REITs)

For the investor who wants access to real estate investment without the hassle of

becoming a landlord, REITs offer a low-risk way to diversify their portfolio. However,

they can be less liquid than stocks and bonds.


REITs are companies that own or finance real estate and derive most of their income

from rent and interest on mortgages financing properties. They also pay out 90% of

their taxable income as dividends to shareholders. REITs come in many forms and

can be grouped by property type, for example, healthcare buildings or retail malls.


Investors can buy REITs directly on the stock market or through REIT exchange

traded funds (ETFs). Publicly-traded REITs are more liquid than non-traded REITs, but

they may have higher fees and be more sensitive to interest rates. Non-traded REITs

are typically offered through private offerings. Investors can verify REIT registration

and disclosure filings on the SEC’s EDGAR system.

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