A Quick Guide to Investing in Real Estate
- Buying an Investment Property
- REITs
- Crowdfunding
- Real Estate Investing Details
- Final Thoughts
Investing in real estate can be a part of your investment strategy whether you plan to build your own house or become a landlord or just hold until someone is willing to pay you for it. You can also invest in it through a Real estate Investment Trust (REIT). You have several options if you want to invest and how to do it.
Buying an Investment Property
Real Estate Investing was once just a way to buy property as an investment. There were only two options from a transaction, you could either put tenants on the property or re-sell it for a profit. This could be an unending cycle of buying and selling if you chose. If you worked your way up you could even become a real estate manager, be a house flipper or simply rent out your second home when you are not using it. Though you will need to do maintenance on the home and prepare for vacancies between tenants.
Buying a home is hard enough for some people so owning a piece of property as an investment means you’re responsible for the upkeep or having someone else manage the details and paying them to do it. This can be someone you know personally or a management company.
People that want to retire early or be financially independent generally use real estate as a large part of their portfolios. Investing in real estate can create add substantially to your portfolio as passive income for the most part; though this is not always the case if you end up owing on your properties more than they are worth. There is the problem with finding good tenants and eliminating bad ones which means your investment is a strain on your own budget.
REITs
Another option for owning real estate without the property management with tenants is buying a REIT trade fund. You can profit from the dividends that the companies regularly pay out to investors. You can buy shares in a REIT like you would a regularly traded stock or you can buy a mutual fund made up from REITs. You have the choice of managing this yourself or letting someone else do it.
You can purchase REIT exchange-traded funds and any of the above domestically or internationally. REITs don’t have mortgages or the kind of equity a home does. You are basically lending money to real estate companies through direct loans or buying securities that are mortgage-backed. Mortgage REITs are leveraged which makes them more risky to invest in. There are equity REITs, Hybrid REITs and mortgage REITs. A hybrid REIT is a combination of equity and mortgage REIT.
Crowdfunding
Crowdfunding is a way of letting you maintain a bit of control over your REIT investments. It has become quite popular through several start-ups allowing for investors to make small, medium and large real estate investments. This kind of investment lets you review your investment properties and pick where you want to invest your money. Make sure you check out the companies you are about to invest in to make sure they are reputable and you know you need to declare the income when you are doing your taxes. You are also choosing individual properties which mean you are not diversifying your portfolio.
Real Estate Investing Details
Investing in real estate is different from investing in a stock. Real estate is just one security you can invest in. Having a well-balanced portfolio means you are diversified in your purchases. Meaning you have invested in stocks and bonds as well as real estate. You will also need to have an emergency fund prepared and are branching out from your initial investment. Real estate investing can be a good way to begin changing your portfolio for the good and the bad so be prepared to figure out how to figure out the ups and downs of what you are investing in for the long term.
There are numerous tools online to help you figure out what you want from your portfolio you can read up on the different tools for investment. You can also determine the amounts of money you want to start out with if you are looking for a property to invest in. If you are looking at REIT investment opportunities you can review any number through online accounts or through your own personal advisor so you know exactly what you are investing in and what kind of a company controls it.
If you want to continue with investing in Real Estate you may want someone to help you with investments. Having some guidance is advisable if you are unsure of how to get your accounts where you want them. You will find many tools online, but if you need a financial advisor, go find one. You can learn from them and they can help you figure out how to get the growth on your portfolio you want. If you want to research the people you want to manage they should be opening to meeting you and working with you to find out if your goals match.
Final Thoughts
If you are interested in investing in real estate of any kind make sure you know what you are looking for in terms of the property. You also need to know how much money you are willing to invest in the Real Estate. Depending on the type of Real Estate vehicle you are looking to put your money into you need to do your homework. There are a lot of good tools available and you need to find the ones that will work for you. Investing in Real Estate can help you add to your portfolio. A lot of personal investments accounts can provide you with information about the types of companies and accounts you are looking to invest in. They also have tools to compare the best ones and you can get information about the companies themselves and contact them for more information.
