Many Americans search endlessly for the perfect investment. They study the stock market, learn about real estate, and may even consider starting their own business. There are many ways we can invest, but one of the most stable investments is buying real estate.
However, buying real estate outright requires a long-term mindset. This is because you need to be prepared to not only secure a loan or save up but also to maintain the property over time. If you’re interested in renting out the property for additional income, then you’ll also need to be ready for the long haul of incoming and outgoing tenants.
Buying real estate may seem like a dream for most. This is especially true for many Americans who are living paycheck-to-paycheck. But, these Americans can also find ways to invest in real estate.
The traditional method of buying real estate involves getting a mortgage. But, in the Digital Age, we no longer need to only buy real estate in this manner. There are many ways we can invest which don’t involve sole ownership.
Read on to find out nine ways to buy real estate so you can diversify your investment portfolio.
Buying Real Estate: Nine Ways to Invest
We currently live in a pro-debt culture where we are encouraged to purchase items beyond our means. While real estate may seem to fall under this category, it’s important to remember to calculate a return on your investment.
Unlike cars, properly maintained homes and properties tend to hold their value. Appliances and cosmetic updates will need to be completed, but this is a small expense in relation to the value of a building.
This is why buying real estate is a wise investment. Currently, the real estate market is standing strong and housing prices are steady. Since it is a seller’s market, however, it may be difficult to find a real estate property you’re willing to pay top dollar for.
But, there are many ways to invest in real estate without needing to spend all your savings or by getting a loan. Explore the following ways to invest in real estate and begin seeing a return on your investment.
1. Buy a Home
Since buying a home is such a common occurrence in our culture, we forget that it’s also a great investment. We are able to build up equity and we can see great returns if the market is thriving when we sell.
By securing a home as a long-term investment, you open yourself up to start investing in other types of real estate in the future. And, you’ll be able to do so without worrying as much about the risk of losing your home.
2. Flip a House
Flipping houses is a popular choice for many first-time real estate investors. Thanks to the ever-growing number of DIY shows, some house flippers believe that flipping homes is a cinch. However, house flipping is not an easy task.
Although it may seem like a good investment based on the home’s price, make sure you understand how much work you’ll need to do and the costs before committing.
3. Real Estate Investment Trusts
There are many different types of real estate investment trusts. Real Estate Investment Trusts are produced by businesses who own or finance real estate. These companies then seek out investors who can also make a potential profit on the REITs income.
However, there are a few disadvantages to REITs. For example, statutory trust disadvantages include a lack of control over the status of the property.
4. Rental Properties
Investing in rental properties is a great way to increase your income. As this income flows in, you can use it to purchase additional rental properties or reinvest in another way. However, rental properties, like homes, require you to have a mortgage if you can’t pay in cash.
You’ll also be subject to various tax regulations based on your rental income.
5. Real Estate Notes
Real estate notes are a hands-off way to invest in real estate. You can invest in real estate notes through the bank or real estate investors. When you invest in real estate notes, you’re buying debt at a reduced cost.
6. Real Estate ETFs
ETFs or exchange-traded funds are found on the stock market. They are an investment opportunity that includes stocks and bonds in a single fund. Real estate ETFs are a great way to diversify your portfolio without paying a high price tag.
7. Invest in Home Construction
Supply and demand can dictate the price of homes. Currently, there are a limited amount of homes which is also keeping home prices steady. But, because of this limited amount of homes, economists predict that the home construction industry will boom.
When you invest in large home building companies, you may see a return on your investment without needing to own anything outright.
8. Real Estate Mutual Funds
Mutual funds are similar to ETFs, but on the stock market, they are traded differently. They are also taxed differently and are associated with different costs.
Mutual funds are better for people with long-term, safe investment goals, such as for retirement. But, if you want to start buying into real estate, investing in real estate themed mutual funds is a great way to do so.
9. Invest Online
The Digital Age expanded our investment opportunities. Today many investment opportunities are available to us that simply didn’t exist 30 or more years ago. One such opportunity to invest in real estate online.
This method is very similar to investing in REITs and you’ll receive dividends, distributions, and long-term appreciation of the properties you invest in.
Budgeting, Saving and Buying Real Estate
To get the most out of investing in real estate, you’ll need to make some room in your current budget. If you don’t currently have a budget, then now is a great time to create one.
To start, write down all of your income and expenses. Examine your expenses thoroughly and determine which can be reduced or eliminated. A good budgeting strategy to use after analyzing your expenses is to separate your expenses by categories.
Each category will have an allotted percentage that dictates how much you can spend each month. For example, you can designate 55% of your income to necessities, 20% to leisure, 10% to debts, and 15% to investments.
Once your budget is set, determine your long-term investment goals. To begin buying real estate determine which method best suits your goals. Each month, set aside this investment amount until you feel ready and able to buy real estate in the manner your goals dictate.
Want to learn more about investing in the stock market? Check out our blog post to learn more.