Investing in real estate is an attractive proposition for many investors. Are you interested in investing in real estate? Looking for ways to get started without purchasing a property outright? These strategies can help you increase your investments and improve your portfolio.
Why Invest in Real Estate?
Choosing to invest in real estate offers a number of advantages for investors, including:
A tangible asset that you can see and touch. Many investors prefer having a tangible asset over stocks, bonds, and other intangibles.
Regular income through the investment. Investing in real estate often provides investors with a steady source of income, which can help offset the costs of a mortgage and/or repairs and maintenance on the property. Often, real estate investments offer enough income to offset those costs.
A steady investment that usually does not lose value over time. While the real estate market can and does dip, real estate investments usually remain relatively steady over time.
Investing in real estate is a great way to diversify your portfolio. Ultimately, that diversity will help provide a higher level of overall stability to your portfolio. Real estate investments, however, may prove more difficult to liquidate than other investments, especially if you buy real estate directly rather than investing through some of the other methods described below. Talk with an experienced financial advisor to get a better idea of how real estate investing fits into your overall investment strategy and whether it's a good choice for you.
How Can You Invest in Real Estate (Without Buying Property Outright)?
Many investors are eager to get started in real estate investing, but may not have the immediate funds or credit needed to purchase a property outright. Some of these strategies, however, can make it easier to break into real estate investing--or to break in at any level of investment, regardless of where you started.
1. Invest in real estate mutual funds.
Like other mutual funds, real estate mutual funds allow you to join a pool of investors committed to the same investment. When you buy into a mutual fund, you may have ongoing expenses associated with that investment or be asked to continue to contribute over time, just as you would with any other investment property, but you will share expenses with the rest of the investment pool. Mutual funds often have low initial buy-ins that will allow you to set the level of investment that you're comfortable with--and allow you to determine what level of risk you're comfortable accepting in your real estate investment.
2. Invest in vacation properties and rent them out.
You can buy vacation properties directly or, as with mutual funds, go in with a pool of other investors to increase the current monetary value of your investment without substantially increasing the financial burden you, specifically, face for your investment. Many investors find that investing in vacation properties can substantially increase the overall return on investment, since vacation renters often pay higher premiums for their stay in those properties. At the same time, vacation rentals may have a higher risk level: there are more renters coming through who may not take care of the property, since they aren't there long-term, and you may struggle to keep your properties rented out off-season.
3. Invest through online third parties.
Many firms online focus on allowing people to buy in on real estate investments as part of a group of investors. Those firms often handle all the details of those investments, from choosing the ideal property to managing the properties: finding tenants, taking care of repairs, and managing any disasters as they arrive. Do your research carefully when investing online through a third party! You want to be sure that you're investing through a reputable fund that will allow you to continue generating equity through your investments as well as one that will manage your funds well. Look for a business with a great deal of experience in real estate investing to help improve the odds of successful investments.
4. Check out home construction investment opportunities.
Investing in home construction allows you to contribute to the construction of new homes in your chosen area--often an area that is filled with investment opportunities and growth. Once the construction is completed, the properties will be sold to new homeowners, allowing you to recoup the funds you've put into that construction. Investing in home construction often offers a faster turnaround for your investment efforts, making it a better solution for investors who are interested in liquidating their real estate investments more quickly.
5. Consider using a property management company to help manage your real estate investments.
You might have the capital--or the credit--to invest in property outright, but not want to spend the time managing the property yourself. A property manager can offer a number of important advantages, including keeping up with tenant management, marketing your property for you, and taking care of rent collection. An experienced property manager can also help field those maintenance requests and even keep up with any emergencies at the property, allowing you to reap the financial benefits of your investment without needing to actively invest time in the property yourself.
6. Sign a rent-to-own agreement.
When you sign a rent-to-own agreement, you invest in real estate without the need to invest a substantial amount in a down payment up front. This leaves you with a way out if you cannot make the payments or if you no longer want to own the property, but it also allows you to build equity in the property over time. If you pull out of the property, the funds you've put in are treated as "rent" and the landlord can try again to sell the property. People often choose rent-to-own agreements when they buy their first home, especially if they suspect that a property may need more care and attention than originally thought.
Are you interested in all the benefits of real estate investing? Contact us today to learn more about how we can make it easier to manage your rental properties.
About the author
Matt Angerer is the Founder and President of VerticalRent. He enjoys writing on a variety of topics that help Landlords, Property Managers, and Renters across America. He is particularly interested in helping renters understand their local marketplace, pick the best places to live, and find an awesome roommate. Since 2011, VerticalRent has grown to service over 100,000 landlords and renters across America.