Real Estate Investing Basics: Two Main Strategies of Real Estate Investment

Real estate investment is risky, especially after the subprime mortgage crisis that played a significant role in the recession. One needs to conduct thorough research to understand the basics of real estate investing. The first step in avoiding a mishap is understanding the risks and avoiding working with dodgy lenders and companies. There are two types of real estate investment: buying specific property and not buying property. It's up to you to decide which one you are more comfortable with.

#1.
Investing in real estate by buying property.

Buying a property requires money, so ensure you have saved up some money beforehand. Here are some tips/strategies to follow:

1.1. Buying and fixing

Buying a home and then fixing it accordingly requires funds and time. Plus, you need extensive knowledge of real estate and repairs. At this stage of investment, you buy a property, repair it, and rent it to tenants.

1.2. Renting to own

Rent-to-own is a process in which you sign a contract to rent a home for a set period, with the option to purchase the home at the end of the term. This process operates by paying a percentage of your monthly rent as the down payment on a mortgage when the purchase becomes official. This type of investment is suitable for people with other loans, as it gives them time to repay without any extra burden of a monthly mortgage. 

1.3. Buying a Rental Property

Buying a rental property means buying and renting it out to tenants. Most people invest this way, so rental property investment is widespread. If done correctly, you, as a landlord, will reap the benefits of such an investment.

1.4. Vacation rentals

Vacation rentals are an innovative and profitable real estate investment business. This requires buying a house or property that you can rent out to tenants temporarily to make money. Another advantage of having vacation rentals is that you can make a large sum of money because the property is in a desirable area. Renting your property through Airbnb can also yield a decent profit.

1.5. Buying commercial property

Buying commercial property for renting offices or workplaces will work in your favor. Everybody needs to work! Thus, renting your property to a company is a good way to raise cash. However, a slight disadvantage is that purchasing a commercial property is expensive. Consider having a business partner if you don't want to buy everything.

#2 Investing in real estate without buying properties.

Buying a property can be expensive for many people. Don't lose heart if you don't want to invest in property. There are plenty of ways you can invest in the real estate business.

2.1. Invest in REITs

REIT, short for Real Estate Investment Trust, is a company that either owns or finances income-producing real estate. REITs focus on both residential and commercial properties. Some investment trusts also trade in mortgages instead of actual properties. In doing so, they provide at least 90% of their taxable income to shareholders via dividends.

2.2. Invest in Real Estate Mutual Funds

A mutual fund allows investors to diversify their portfolios by holding a mutual fund and real estate. You choose mutual funds that are growth or income-oriented. Mutual funds are subject to real estate-related risks, so be wise and extra cautious when making funding placements.

2.3. Investing in wholesaling houses

Wholesaling a house involves contracting a potential seller, then selling the contract to the next buyer for a profit. If you are the wholesaler, you can keep the profit for yourself.

2.4. Use online investing platforms - crowdfunding platforms

You can earn money by investing in online platforms.
Like other stocks, these online platforms can also help you in real estate investments. Often, these investments you make are a source of crowdfunding. You can check online platforms if you are interested in real estate investment.

2.5. Invest in real estate partnerships

Real estate partnerships are a common way to invest. Each person will be handling different responsibilities. The partnerships can be used to purchase property at a lower price. You can set the terms for a mortgage or a down payment for the property. Depending on the terms of your partnerships, you might not need much to own a property.

2.6. Real estate investing companies

Many companies operate in the same real estate investing space without requiring you to own a house. For example, RE/MAX sells homes by real estate agents. Companies like these don't involve buying actual property, but the agents do. So, being a real estate agent will benefit you as well.

Conclusion

The amount of money you invest in real estate depends on the form of your investment. The more disposable income you have, the more options you have. A minimum of $10,000 is needed to start a real estate business. For REIT, you might start with $500 on the lower end. Aiming for $1000- $ 2000 should get you started in the industry.