4 Ways to Invest in Real Estate
If you have been considering adding real estate to your investment strategy, you know there are several ways you can add properties to your portfolio. Take the time to learn about the different real estate investing options available and decide which ones meet your investment needs.
Real Estate Investment Groups
You can think of Real Estate Investment Groups as a way for you to invest in rental properties without having to take on the responsibilities of a landlord. One investor purchases a multi-unit facility, either residential, office or manufacturing. They serve as the landlord, collecting rent, attracting tenants, and maintaining buildings. You purchase a portion of ownership into this group and receive returns based on the income of the building. REIGs can charge high fees, but you can expect a high return on your investment.
Real Estate Investment Trusts
Real Estate Investment Trusts are sold on stock market exchanges and are an easy way to introduce yourself to real estate investing. A management company purchases a group of investment properties. Some of these properties may be rental units; others may be purchased with the intent to resell. You invest in shares of the REIT and receive dividends based on the profits. Individual investors like to work with them because you can buy into larger-scale projects, such as malls or manufacturing facilities, that are outside of your financial capability.
When you hear rental properties, think multi-family buildings, apartment buildings, or vacation rentals. In this instance, you are the landlord, responsible for attracting tenants and maintaining the property. These require a high financial commitment, as you must pay for initial repairs and maintenance. You are also responsible for monthly mortgage payments, even when the property is vacant.
One of the most hands-on forms of real estate investing is house flipping. When done correctly, you can make a significant return on your investment. However, it is important to sell the property quickly so you do not lower your profit by making multiple mortgage payments. House flipping is a high-risk investment. There are two different ways you can invest:
- You can purchase a property for a low price, hold it through rising housing prices and sell it at a profit.
- Alternatively, you can purchase a property, make necessary repairs and sell the finished project.
With any type of investment, you should understand the risks. Some investors are willing to accept a higher risk, anticipating a higher return. Always research your options and select the one that meets your financial needs.