Real estate investing stands for buying, owning, managing, renting or selling any kind of real estate for profit. In other words, any property that is owned for the sole purpose of creating profit, whether through market value or rental income is a real estate that is invested in.
It is an asset form with limited liquidity when compared to other investments. Real estate investment also needs large amounts of capital and high cash flow to become a profitable investment. However, it offers a unique mix of safety, steady cash flow, consistent ROI and powerful odds of high capital gains.
Although you may earn less than, for instance, investing in the stock market at its peak, you also have a much lower chance of losing everything. Commercial rental real estate has an average of a 6% ROI in the last few years, while diversified and residential rental portfolios have an average of 7.5% ROI, according to Investopedia.
If you’re just starting to invest in real estate, read on and discover few simple ways for doing it.
One of the most popular options for investing in real estate is partnering with others to invest in a better deal, which can either be residential or commercial. Two obvious benefits of investing in a larger real estate deal online are low minimums and that you don’t have to be an accredited investor.
Low minimums, because depending on the platform you use, you get to invest as little as $1000 to become an owner of the property. In the past, for you to participate in these kinds of investments, you had to be an accredited investor, the requirement that exists no more for certain investment types.
Hence, if you’re searching for a way to diversify your investments with the lowest amount of capital needed, this can be a lucrative path to start.
Two favorite platforms for combined investing in real estate are:
- Fundrise – One of the more popular real estate investing websites. Fundrise requires a minimum investment of $500 and has fees between 0-3%. The platform is harsh about which project it accepts – only one in twenty proposals is chosen. It has a wide range of investment properties to choose from and doesn’t require an accredited investor to invest. The only platform that allows this currently.
- RealtyMogul – Which offers investors different properties to choose from, including mixed-use, residential, retail and commercial. No investors fees are needed, as they place that burden on property holders. Investors can expect a return in just a few weeks after the project gets funded.
Purchasing, renovating and flipping properties
One way of investing in real estate that was popularized in various reality shows. Basically, you purchase a property that is cheap because it requires renovation, renovate it, and then sell it for a big profit.
However, it involves numerous risks. Paying to much for that kind of property means that profits will be low. Spending too much on renovations will also lower them. For this kind of investing it is wise to consult professionals for property investment advice in order to minimize such risks. Also, if the property isn’t sold quickly, every month you get to pay carrying expenses like mortgage, which can also devour your profit margins.
Remember not to renovate too much, by either adding too many rooms or installing a high-tech kitchen and bathroom, if the property is to be sold to people with low income. This method is more suited for general contractors and handymen as they can easily monetize their skills.
Purchasing and renting out vacant properties
Suited for those who want to enjoy a house on the beach when they want, while still paying the insurance and mortgage via short term rentals during the rest of the season. It is also a great way to produce extra monthly cash flow. If you already have a vacant real estate, you can start the land-lording by renting it.
Just remember to be careful when drawing up the rental contracts, particularly if you wish to use the property from time to time. The income will depend on how much it is desirable for tourists. The disadvantage here is that the real estate has to maintained year-round, while it generates profit only in certain months of the year.
Moreover, only a few properties are attractive to tourists. A mistake in pricing can make you miss out on the few weeks of the years where you would otherwise create income or make you earn less than appropriate.
Technology advancements have changed many human activities, and this modernization also involves a real estate business. From the availability of real estate data, how business is operated, the bridging of the client-manager distance boundary to the attitudes of consumers toward the real estate industry, everything has changed.