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.
Homeownership
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 https://www.sellmyhousefastforcash.com/
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.