Different Ways to Invest in Real Estate
Examining Ways You Can Invest in Real Estate
Flipping Houses, REITs, REIGs
When looking at your future, and making sure you are setting yourself up for success down the line, it’s important that you invest your money in a safe, and smart investment. When people typically think of investing, the first thing that might come to mind are stocks, investment portfolios, etc. What most people don’t think of immediately, is real estate investing. Real estate investing is a powerful way that you can invest money in a product that typically appreciates at 4.4% in value since 1991, according to the FHFA. Additionally, there are even more ways to invest in real estate besides the typical methods investors may be aware of.
Traditional Methods of Real Estate Investing
The most traditional method of real estate investing, is actually when you buy your first home! Not only does your home provide a roof over your head, but it is also a crucial part of your investment portfolio. By paying your mortgage every month instead of paying rent, you are building equity in your home, and locking your monthly payments instead of risking your rent being raised on you.
Another traditional method of investing in real estate is purchasing a residential property that you then rent out, and become a landlord of that property. Owning a property and being a landlord is anything but passive income, however, you’ll need to manage the property and make sure you rent to the right people and maintain the property. If that doesn’t sound like something you want to take on yourself, you can hire a property manager to take care of all of those responsibilities, but it will eat into your profits.
Additional Ways to Invest in Real Estate
House flipping is a method of investing in real estate that is less traditional, but likely just as known as the methods discussed above, due to the popularity of house-flipping shows on TV channels like HGTV. Flipping a house can provide you with a profit in a much quicker timeframe than any other method of real estate investing, but it requires much more technical knowledge and experience than other methods of real estate investing, as well as potential risk. In order to flip a house, you need to be able to find an undervalued property, identify what parts you can fix up, and what parts can’t be fixed, purchase the property, and then make those required changes before selling the property for a profit. If you purchase a house and are then unable to sell it for a profit, either by having to hold onto the house for an extended period of time or by investing in changes that don’t provide a good return on investment, you could be looking at a loss on your investment.
A Real Estate Investment Group, commonly referred to as an REIG, is a way for people to invest in rental properties without having to worry about managing the property. REIGs operate very similarly to mutual funds, in that you pay into the investment group, which collects investments from across the nation, and then purchases apartments, condos, etc that are owned by the investors. In exchange for purchasing and managing the property, the investment group company will take a portion of the monthly rent from all of the investors. To invest in an REIG, however, you are going to need a good amount of capital, or financing.
Finally, a Real Estate Investment Trust, commonly known as a REIT, is similar to an REIG, with a couple of key differences. A REIT is very similar to purchasing stocks, as a REIT is traded on the open market, and uses investors’ money to purchase properties and provide returns to stockholders, including dividends. The amount of capital that you need to invest in a REIT is also extremely low, as you can invest in a REIT with almost any amount of money. REITs also provide truly passive income, and are extremely liquid, as they are listed on the stock exchange. This of course means that they carry the same risks that stocks provide, as they can easily fluctuate depending on the market.
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Protect Your Investment By Working With an Ask Cathy Agent!
An investment in real estate is an investment in your future, as well as potentially providing a home for you and your family depending on the type of investment. It’s critical that you work with an experienced real estate professional like the Realtors at the Ask Cathy team to make sure that your home, rental property, or investment property works to your advantage, and not the other way around. Our Realtors are experienced in every type of real estate transaction and can help advise you during your property search on what homes would be a good investment, and what homes could end up taking money OUT of your pocket. Contact us today for your complimentary consultation by filling out the form below, or by calling us at 816-268-4033!
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