Investing in Real Estate: 4 Simple Ways to Get Started
If you have ever thought of investing, owning a home or apartment must have crossed your mind. You may not have to be the one taking calls from tenants about clogged toilets and all that. You can decide to go the passive route and hire a property manager paid by commission. From an investors’ perspective, you can diversify your income source and accumulate wealth to be diverted to other opportunities elsewhere.
You can start with as low as 500 US dollars. If you have a good credit rating, you may get up to 95% financing from financial institutions. You will need basic knowledge of real estate before you commit your hard-earned capital. Here are four ways to get you started in real estate investment:
Rental property is the most common way to invest in real estate as it is simple and beginner-friendly. You will need initial capital or a down payment plus mortgage financing. You can also decide to use the ‘house hacking’ strategy.
This entails renting out rooms from the same unit that you reside in. Over time, you can save a lot from collected rent, enabling you to clear your mortgage loan much sooner. Remember, the longer your stretch your installments payment, the more you will pay for mortgages.
Real Estate Investment Groups (REIGs)
This real estate investment model entails the formation of a group with the common goal of owning property. Members raise funds that will be used in the construction of houses. Through this group, you can own several units managed exclusively by the management appointed by the group.
The management earns a small percentage of the rent collected. In the case of occasional vacancies, you will be entitled to a little income from a portion set aside to cover such situations.
Fix to Sell
Here, an investor purchases a property, renovates and improves it, raising its market value before selling. Due to the intricacies of this model, it is not recommended for newbies. You will need to have an eye for undervalued properties that have the potential to make you the best deals in a short period.
This model is cash intensive due to the short duration of buying and selling of properties.
Real Estate Investment Trusts (REITs)
This model involves forming a trust that collects funds from investors in the form of stocks to invest in real estate. The REITs are traded in the major stock markets and offer a regular investor income in dividends. Through REITs investment, you can gain entry into the commercial buildings market such as malls and offices, which may not be feasible for an individual investor.
If you decide to become a passive real estate investor, look for models that best serve your interests. Beware of REITs that charge higher fees than others leaving you with small returns. Your amount of capital and credit worth plus time availability should be your guiding factors in deciding your investment choice. If you do not have an eye for details, especially for renovation, consider REITs or REIGs as property flipping may not be your strength.