Real estate investment is one of the most lucrative businesses that you can do. In every city globally, the demand for residential homes, commercial estates, raw land, and other investments is growing at an alarming rate. However, you got to be on your guard even with the growth as con people have infiltrated this sector. You can quickly lose your savings in a single transaction from the fake traders in the market.
To invest in real estate, you don’t need to be actively involved in the day-to-day work. Instead, you can invest your money in a real estate company that is actively and firmly grounded in the market, such as Concreit or a similar company in your city. After investing your money, you’re bound to get returns from the company’s profits, unlike leaving your money idle in your bank account.
To help you, here are tips for investing in real estate:
Go For Real Estate Investment Groups (REIGs)
If you desire to invest in real estate and not be involved in the business’s day-to-day running, then real estate investment groups are the best bet. What’s required for you is ready financing and a capital cushion. The structure of REIGs is, more or less, like mutual funds, but their specialty is in rental properties. Usually, REIG purchases or constructs apartment blocks. Afterward, investors are welcome to purchase the built apartments through the group and join it.
As an investor, you can own one or several units. However, it’s the company’s work to manage all the buildings on behalf of the investors. Part of the real estate investment group’s work is to advertise occupancy vacancies, undertake maintenance works, and interview tenants before allowing them to occupy available spaces. However, the REIG takes a percentage of the monthly rent to keep the company’s operations running.
In addition, you can still receive some income even when your units aren’t occupied. This is because all apartment units in the company contribute to a shared pool given to the company’s investors. However, this is only sustainable if the vacancy rate doesn’t escalate too high.
Another benefit that you gain from an REIG is offering investors income and property appreciation.
On the negative side, there’s too much risk of vacancies, and some REIG managers are unscrupulous. Moreover, REIGs impose fees like mutual funds.
Opt For Rental Properties
Apart from investing in REIGs, rental properties are another excellent investment option in real estate. If rental properties become your option in real estate, unlike REIGs, you’re directly responsible for managing your tenants. In addition, you have the freedom to exercise do-it-yourself (DIY) renovation ideas. In managing private rental properties, you’re required to have a lot of money to cover maintenance costs, as well as cover for months you have vacancies.
Some of the benefits of rental properties include a consistent income from occupied properties. In addition, rental properties appreciate with time. As a result, if you plan to sell your rental properties in the future, you’re bound to make a good profit. Moreover, rental properties attract several tax-deductible expenses.
On the other hand, dealing with tenants can be a tedious task. On top of that, some tenants may damage some resources in your property, resulting in losses. Also, if your rentals aren’t occupied for a long time, your income significantly reduces.
Nonetheless, if you’re planning to diversify your investments, rental properties are worth considering. The fact that rental properties hardly depreciate is enough security for your money. As a result, you gain, instead of making losses, upon selling your apartments.
Consider House Flipping
If you’re new in the real estate business, this option might be a tall order. However, it’s a good idea for people with experience in real estate marketing, renovation, and valuation. It requires substantial capital and outstanding ability to oversee and do repairs where needed. Unlike buy-and-hold investors, house flippers buy undervalued properties and sell them at a profit. Ideally, they aim to acquire property in less than six months.
A unique thing with property flippers is that they aren’t geared to improving the properties that they acquire. Instead, they assess a property before buying it to ensure that it can be sold in the same state at a good profit.
Many property flippers don’t accumulate a lot of finances as they quickly seek to acquire and sell a property. As a result, if a parcel can’t sell as soon as possible, it may lead to snowballing losses.
Even though most property flippers sell houses to interested customers without any improvement, another category of flippers will add value to a property before selling it. To this kind of flippers, their modus operandi is to deal with properties in the long term because renovation works may take a couple of months. However, it attracts a high market value once the house has been renovated. As a result, they make high-profit margins.
There are several benefits of house flipping. For one, your capital is tied for a short time because you can sell a property as soon as you’ve acquired it. In addition, flipping is associated with high returns. You may not do any renovation or upgrading works for your house, but you can make a good profit after selling it. Consider wholesaling houses for beginners if you’re looking to flip houses with minimal risk or capital investment. Wholesaling real estate is essentially flipping contracts to other investors without ever owning the real estate.
The disadvantage with house flipping is that you need to understand the market. In addition, outdated house designs might be a challenge to sell to younger generations.
Dive Into Real Estate Investment Trusts (REITs)
If you’re seeking to build a real estate portfolio knowledge without the typical real estate transaction, a REIT is the best bet. A trust can establish a REIT by investing its investors’ finances in acquiring and running income properties. Unlike other real estate properties, REITs are traded in regular stocks.
Once a REIT has sold properties, it must pay 90% of the gained taxable profits as dividends to retain its REIT status. This strategy is supposed to help the REIT be spared from corporate income tax. Other companies would be taxed on their profits, and then distribute the remaining profits as dividends, which isn’t the case for REITs.
REITs aren’t different from other dividend-giving stocks; thus, they guarantee consistent income to the investors. Unlike the other real estate options, REITs can be a doorway to enter into investments, like office buildings, nonresidential properties, and malls. Such investments aren’t possible for individuals to buy directly.
One advantage of REITs is that they’re highly liquid. An agent isn’t needed. In addition, you don’t require a title for cashing out your investment. REITs can be described as a more formalized real estate investment group category. In addition, the dividends coming from REIT stock investments are a source of income. Your holdings in REITs are long-term, acting as cash-producing leases.
Opt For Online Real Estate Platforms
Consider joining real estate platforms if you’re after more significant residential or commercial deals. Your investment is made through online platforms, also called real estate crowdfunding. Even though you have to invest good capital, it’s not much like what you need to buy properties directly.
Online real estate platforms are where investors meet real estate developers. As an investor, you give financing to developers who invest on your behalf.
In an online real estate platform, diversifying investments is possible without the need for a lot of money. In addition, you’ve got the choice of investing in a portfolio of projects or a single project. Investing in different geographical areas is easy with an online real estate platform.
As much as this type of real estate investment has several advantages, it has downsides, too. It’s highly illiquid, accompanied by lockup periods. In addition, you’re required to pay management fees.
Consider Places With Good Security For Investment
Nobody would want to stay in a place where the crime rate is high. For some homebuyers, they’ll do a background search of the neighborhood’s security. As a result, before you build rental houses or home apartments for sale, the safety of your clients should be a priority. Is there a nearby police station with regular police patrols at night? Is it possible for one to be late at night without potential threats? Anyone can risk traveling at night, but the risk level is minimal in some areas.
With that said, a property in a location that threatens the safety of the occupants can lead to vacant houses for a long time. This would be a loss, especially if you’d taken a mortgage to build your properties.
Consulting From Experts
Having the capital to invest in the real estate business is good. However, it isn’t the only thing that you need. You may need to consult professionals in the market about the future of investing in some areas, rental prices for different places, and how you can determine fair prices before purchasing a specific property.
Final Thoughts
Some of the wealthiest individuals in the world are investors in real estate in some of the world’s richest cities. As a result, diligently investing in real estate can help you grow your wealth exponentially. However, you need to understand the different options available in real estate and good practices. Thus, this article has illustrated several tips that are invaluable for you.
