While buying real estate worth six or seven figures might be daunting or cost-prohibitive for some, others take the plunge and join the ranks of rental property owners.
One source citing census data notes there are 19.95 million rental properties in the U.S., and these properties have 48.2 million rental units. Being a landlord and dealing with tenants isn’t for everybody, but the good news is that there are other ways to invest in real estate.
Here are three options to consider if you want to invest in real estate in a way that’s best for you.
1. Investment property.
Buying an investment property allows you to earn money from monthly rent, property appreciation, and a monetization premium when you sell it eventually. Owning a rental property means you’ll have more on your plate than if you invest in real estate in other ways covered below. You can get the help you need by retaining the services of a property management firm that can provide the landlord services your tenants expect. That will, of course, cost you.
2. Real Estate Investment Trusts (REIT).
One way to invest in residential homes, shopping centers, commercial facilities, apartments, office buildings, and more — all without owning any physical real estate — is through REITs.
Real estate investment trusts allow investors from all walks of life to own units or shares in properties. The more units you buy, the more you own. And owning units comes with its perks. For one thing, REITs typically distribute substantial dividends to their unitholders. By boosting your REIT holdings over time, you can potentially build a solid stream of regular income.
Do your research to find the right REITs for you. You can invest by the REIT size, the type of properties invested in, the dividend payout amount, the payout frequency, and other things.
While the potential upside isn’t as high as if you own physical real estate, the flip side is that you won’t have to worry about things like:
- Paying to purchase physical rental properties.
- Maintaining and repairing the real estate.
- Finding and dealing with tenants.
You can find REITs that are not publicly traded on a stock exchange, but you’ll probably want to stick to the publicly traded ones. That’s especially true if you’re new to REITs and are still trying to figure things out.
If the idea of picking individual REITs seems like a daunting task, one option is to buy index funds focused on REITs. Doing so can help lower risks and make things easier.
3. Online Real Estate Investment Platforms.
Another way to invest in real estate without physically owning properties is through an online real estate investment platform. You can go this route to finance projects and, by so doing, get distributions quarterly or monthly. However, using a real estate investment platform does mean taking on some risk, but that’s the case regardless of how you invest in real estate. As is always the case, due diligence is key — and so, too, is ensuring that you find opportunities that align with your goals and risk tolerance.
Another thing to consider is that you won’t be able to unload the investment as easily as you can sell stocks. You’ll usually need to meet specific income levels and net worth to qualify for real estate investment platforms, so you may need to spend some time looking for the right fit. If you’re interested in investing for diversification, pursue investment opportunities in private equity and real estate available to accredited investors. Ensure the investment platform you use follows an investment strategy that aligns with your objectives.
If you’re looking to invest in real estate look no further than Nestfully. In addition, these three options are worth considering. Real estate investing isn’t for everyone. But if you research and find opportunities that are a good fit, you’ll find real estate investing to be a rewarding strategy.
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This content is made possible by Larry Alton.
Photo by Brandon Griggs on Unsplash