It’s an open secret that real estate investment is a time-tested remedy for putting your hard-earned money to effective use. For starters, the main purpose of real estate is to own a tangible asset. In return, it will not only fetch you regular rental income but a capital appreciation that can multiply in value over the years.
Moreover, experts believe that real estate is by far one of the best income producing assets for the long run. However, you need to navigate all the possible options and do a thorough research. Only then, you will be able to score higher returns!
So, if you’re planning to improve your chances of making money, I’ve got your back. Today, I will be sharing the 7 ways to invest in real estate that would be lucrative. If you’re in, then keep scrolling…
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The Best Way To Invest In Real Estate
It took me about a month to research the 101 different possibilities of real estate investing. Out of all, I found these 7 ways to invest in real estate to be the most meaningful!
Irrespective of whether you are a newbie or a veteran of the investing world, I’m sure this will help you to score better returns.
1. Real Estate Investment Trust
If you plan to generate passive income and get the most out of your real estate, try rental property. The long-term contract provides consistent income flow. On the flip side, short-term rentals might fetch you fluctuating monthly returns. This is because the tenant might come and go. Still, this could be effective for you. Yes, if your property is in an area that attracts a ton of tourists and visitors.
But before you go ahead and make up your mind, be aware of the other vital factors like utilities, hidden costs, and market area. They can greatly impact your passive income and will help you better understand if it makes good financial sense.
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2. Investment In Rental Property
REITs can be quite a valuable real estate investment opportunity. It makes more sense if you’re planning to avoid huge capital-intensive transactions. This investment type is popular for bringing funds from a pool of investors and then buying and operating the income-generating properties.
As an investor, you can buy and sell as required. This is actually a lot similar to the stock exchange, which makes REITs a great liquid real estate investment.
The strategy will work well if you wish to devote a portion of your portfolio to real estate but do not have a huge capital to invest in a property. Besides, they also offer better diversification without being too heavy on your pocket.
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3. House Flipping
For starters, the real estate industry is full of investors who are active in real estate investment in house flipping. However, this might not be the best option for beginners who are not aware of the marketplace. but works great for experienced ones.
In a way, you can say that the house-flipping strategy is pretty similar to daily stock trading. The house flippers in this industry typically buy and sell the undervalued property for a small profit within a period of 6 months or less. In some cases, the investors don’t even invest in fixing the property. Their focus is primarily on those properties that have got a better value which will be higher than the current buying price.
As a heads-up, all I can say is flipping properties require experience and skill. When the hot market starts to cool down, you can get stuck with your investment when the associated cost increases. So staying aware of the local or national market trends is a must if you want to get into house-flipping.
Also Read: How To Start Flipping House With No Money?
4. Real Estate Crowdfunding
It is more of a digital real estate investment of the modern era. In the case of crowdfunding, the investors bring together their funds for investment in quite a large commercial or residential property. There are multiple reliable online real estate platforms that provide such types of crowdfunding opportunities. But remember, there is some amount of capital investment required, which could be less or more than the other options on this list.
This form of investment can provide great geographic diversification along with project opportunities. However, you need to consider the management fee associated with the investment and lock-in period.
As an investor, you will take a passive role but have minimum input into management. However, this can be a great investment opportunity if you don’t have the required skill or time to manage the property independently.
5. Real Estate Mutual Funds
As an investor, you will have a wide array of opportunities in this for diversifying your investment portfolio. Here, the investors will own a portion of the mutual fund while the company will own the investment. You being the investor, will be scoring profits in the form of dividends or a certain share amount appreciation.
for starters, real estate mutual funds primarily invest in real estate stocks and direct purchases of commercial, residential, or industrial units. So, this investment option will favor small investors who do not shy away from dealing with real estate directly.
But a piece of advice will be to stay mindful as the investment in real estate depends on a bunch of factors like demand and supply demographic, interest rates, and market conditions.
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6. Hard Money Loans
For an investor, the easiest way to make an investment in the real estate property is through hard money loans. Here, you will provide loans to individuals. Commonly known as bridge loans, hard money loans are short-term financing options for the investment project.
The loan is available on the basis of the property value secured. The lender (in this case, you) provides about 65% to 75% of the property value. Here you will earn in the interest form, which is higher than many other property loan options.
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7. Timeshare vs. fractional ownership
Partial property investment is quite a popular form of real estate holding. But you need to understand the distinction between the two before you pick one. On one side, fraction ownership is partial ownership of a certain property. The fraction will depend on the number of co-owners.
In this, you will be allowed to use the property every year for a specific period of time in proportion to the ownership share. As an owner, you must take care of the expenses associated with repair and maintenance, insurance, property management, and taxes. When the investor decides to sell the property, each fraction owner will receive a proportionate share from the proceeds.
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In contrast, timeshare investors do not have property ownership. As an investor, when you enter the timeshare contract, you will simply get the right to access the property and enjoy the pre-determined facilities for a specified period. The annual cost is all-inclusive in timeshare.
If you do not wish to go on vacation at your timeshare for a particular year, you can choose to rent it out. Such types of investments come with long-term contractual conditions, which makes it difficult to end or transfer the property.
Therefore, a piece of advice will be to review all the agreements carefully and consider taking lawyers’ advice for a better investment option.
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Conclusion
Needless to say, Real estate investment comes with a ton of advantages. But careful consideration is extremely crucial to put your money in the right place. As an investor, you need to put in your time to research the available opportunities, area of interest, and various other aspects before you invest your cash.
And I’m sure, our discussion on the top 7 ways to invest in real estate will help you make a good pick. A good investment pick will be fruitful and will definitely help you earn passive income over the years. So wait no longer and analyze the opportunities available for you to make the right decision. It surely will be worth your time and money you’re about to invest.
