5 Simple Ways to Invest in Real Estate

Thinking about getting into the real estate market as an investor but not entirely sure how to go about it? While there are many options out there, from buying residential homes and flipping them to putting your money into an REIT, they’re not all the same, and they’re not all ideal fits for those just getting into the industry. Let’s take a look at five simple ways you can invest in real estate.

A Rental

Let’s start with perhaps the most common and most basic method – a rental. In this scenario, you’ll put your money into a rental property. You’ll rehab it, upgrade it and make it more appealing, and then, rather than flipping it, you’ll hold it and rent it out. This allows you to benefit from ongoing cash flow from rental payments, as well as benefit when you sell the property down the road. However, you are the landlord in this situation, which means you’re responsible for upkeep, repairs, management and more.

Investment Groups

A real estate investment group allows you to pool your capital with other investors and reap rewards. They operate in a similar way to mutual funds, and allow you to avoid all the hassles and costs involved with actually being a landlord (no maintenance, no upkeep, no need to worry about upgrades, etc.).

Flipping

Also known as real estate trading, flipping is a pretty well-known process but it requires a very different mindset than most other types of investing. In this scenario, you’ll need to research individual properties and markets, and find either areas that are about to explode in popularity (or have already grown very hot), or homes that are extremely undervalued. You’ll buy the property, hold it for a very short period (sometimes only for a month or two) and then sell it for a profit. The profit margin on these deals is sometimes small, and you make money through trade volume (the more trades you make, the more you earn).

REITs

We mentioned REITs, or real estate investment trusts, a moment ago, but they can be invaluable investment tools, particularly for non-accredited investors. Basically, these allow you to combine your money with other investors and put it into real estate deals. You earn dividends on your investment in the trust but have little control over where your investment is used (that’s up to the trust itself).

Using Leverage

Leverage is a powerful tool, and allows you to control an entire property for only a fraction of the price. For instance, the right mortgage type might allow you to control a property for only 5% of its sale price. You can use this to buy and sell properties, but be wary. Leverage can cut both ways, particularly if you’re not able to find a buyer before your mortgage incurs multiple payments.

These are just five of the ways to get involved in real estate investing. There are many others, and they all bring something else to the table. Compare your options and choose the method that best suits the amount of capital available to you, as well as your specific risk tolerance.