Are you an investor and you feel as if the return on investment you are getting from the stock market is not sufficient? Are you looking to diversify your portfolio by entering the real estate market? Many wannabe real estate investors are simply put off from making this kind of investment because they think that investing in real estate requires a huge amount of capital up front. Others think that managing real estate investments requires a lot of time and effort.
While this is partly true, 2017 has given us new options of investing in real estate that will require less capital up front, and less amount of time to manage. These new methods have made real estate a possible investment for many people. If you are exploring new ways of expanding your investment prospects, here are some genius ways of investing in real estate.
- Purchasing a rental property
Buying houses and renting them out to tenants is a nice way to generate extra cash flow monthly. For you to get extra monthly cash flow, you need to buy a property that commands more rental income than the combined monthly expenses (monthly mortgage payment, property tax payment, and home insurance payment). The best way is to purchase a property in a location where rent is high, but you can also generate positive cash flows by putting a large down payment on the home, which will in turn, lower your monthly mortgage payments.
However, there are two disadvantages of directly owning a rental property. First, you will require a large amount of cash up front – to cater for the down payment, home insurance, taxes, and any maintenance necessary.
Second, you must put up with tenants, and we all know that some of them can be difficult. Screening them before allowing them into your property is a good way to filter the irrational ones. You should also put in place tough bill payment measures to encourage them to pay on time. If you don’t want to do all this work, you can hire a property management firm to run your rental houses.
- Crowd funded real estate
This is one of the latest methods of investing in real estate. Crowd funded real estate is basically joining other investors so that, together, you can invest in either residential or commercial real estate.
The main advantages of investing in real estate using this strategy are:
- Low up front capital – this approach allows investors to invest even as little as $1,000 – depending on the choice of platform- and become part owners of a property.
- It doesn’t require you to be an accredited investor. Some time back, the law required you to be an accredited investor before you could invest in crowd funded real estate. However, changes in laws mean that you can now invest in this method even if you are not an accredited investor.
If you are interested in crowd funded real estate investment, here are the best platforms to use:
- Fundrise – is a very popular crowd funding site for real estate investors. It requires a minimum of only $1000 to get started and the fee charged ranges from 0-3 percent. This site is very choosy on the projects it accepts -in fact, only about 5 percent of the projects submitted are accepted. Another good thing with Fundrise is; to invest, you don’t need to be an accredited investor.
- Realtyshares – this platform offers investors a wide range of properties to pick from. These include commercial, retail, mixed-use, and residential properties. They don’t place any fees on investors and investors can start realizing returns only a few weeks after investment.
- Real Estate Investment Trusts (REITs)
REITs offer investors great a way to invest in real estate without them being actively involved. Simply put, a REIT is a fund set up to invest in stocks, mortgage instruments, and bonds in the real estate sector.
Types of REITs include mortgages, equity and hybrid. A mortgage REIT is a fund that invests in mortgages, while an equity REIT channels its investment to properties. A hybrid REIT is basically a mixture of mortgage and equity REITs. All the three types of REITs usually offer high returns.
If you don’t have time to closely manage your real estate investment, then you should go for REITs.
- Flipping properties
Flipping houses is a high-risk strategy, but one that can reward you highly. Home flipping entails buying a home below the market value, renovating it, and then selling it at a profit. Flipping works particularly well when home values are on the increase.
A great flipper spends a huge deal of time searching for properties that represent a bargain. A model flip house is one that will only need minor aesthetic renovations and improvements before it is put on the market.
If you decide to invest in real estate by flipping homes, you have to be wary of the fact that, sometimes, the property may take a while to sell – especially for a good profit. This is why, before you buy a home to flip, you need to do extra research on the home – to find out if its location is prime, what sort of renovation it requires before it can be put on the market, and the price its going for.
- Renting out a part of your residential home
This strategy offers you a chance to earn some much-needed rental income on the home you live in. You can start by renting out your basement or a room in your house that is currently not in use. Another way is to purchase a duplex, use one part as your residential home, then rent out the other.
The major advantage of renting out a part of your residential property is you will be able to closely monitor your tenant(s). It is highly unlikely for renters living in the same household as the landlord to avoid paying rent and other bills.
There are different strategies of investing in real estate. However, before you begin a new investment, you need to do your due diligence to pick a strategy and a property that will give you high returns.