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

Two main strategies: first is buying property and second is not buying property.

last updated Thursday, April 4, 2024
#real estate investing basics #Real estate investing

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John Burson

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CONTENTS

Real estate investment is risky, especially after the subprime mortgage crisis that played a significant role in the recession. One needs to do thorough research to understand the real estate investing basics. 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 or not buying property. It's your call 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 have to have enormous knowledge about real estate and repair. By this time of investment, you buy a property, repair it, and rent it to the tenants.

1.2. Renting to own

Renting to own a home is a process where you sign a contract to rent a home for a certain period with an option to purchase the house once the time expires. 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 the 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 where you can make money by renting out to tenants temporarily. Another advantage of having vacation rentals is that you can make a large sum of money because the property is in a desirable area. Using Airbnb to rent your property can also make you 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 investment for raising 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 quite a lot of people. Don't lose heart if you do not want to invest in buying properties. There are plenty of ways you can invest in the real estate business.

2.1. Invest in REITs

REIT, also known as Real Estate Investment Trust, is a company that either owns or finances income-inducing 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 taxable income to the investor via dividends to the shareholders.

2.2. Invest in Real Estate Mutual funds

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

2.3. Investing in wholesaling houses

Wholesaling a house means contracting a potential seller, taking that contract, and selling it to the next buyer for a profit. If you are the wholesaler, you can keep the profit by 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 any online platforms if you are interested in real estate investment platforms.

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 by a mortgage or down payment for the property. Depending on the terms of your partnerships, you might not need too much to own a property.

2.6. Real estate investing companies

Many companies work on the same level of real estate investing without you needing to own a house. For example, RE/MAX sells homes by real estate agents. Companies like these don't involve buying an actual property but the agents. So, being a real estate agent will benefit you as well.

Conclusion

Investing money in real estate depends on the form of your investment. The more disposable income you have, the more options you attract. 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 going in the industry.

 
 
 

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