Investing in real estate can be very lucrative and it can help you diversify your investment portfolio. Real estate is often perceived to require a lot of money to begin but this isn’t the case.
While some of that is true, there are new options that can make real estate a potential investment for you.
The truth is that real estate investment isn’t for everyone, however, it is a very lucrative investment channel. The problem now is not many new investors know where or how to invest in real estate. If you want to expand your investment horizons, here are 4 different ways to invest in real estate.
1. Invest in rental properties: Buying a home and renting them out is a wonderful way to generate an extra source of income. In order to achieve this, you have to purchase a house and lease it to tenants which could be monthly or yearly. The properties range from single-family homes to entire apartment buildings depending on your cash flow, an investor might choose to rent out an entire single-family home or rent out individual rooms to tenants.
This is a great investment, however, the two downsides to owning a rental property directly. First, it typically requires a lot of cash upfront – from the downpayment to the maintenance required.
2. Flipping investment properties: House flipping involves the purchase of run-down properties with an intention to renovate and resell. This can be a rewarding investment but it is also risky. In order to excel and succeed in the house flipping business, you need to strategically locate those run-down homes. The ideal flip home would be one that only needs minor cosmetic repairs. You could then make the home look more aesthetically appealing and sell for profit.
The risk to flipping houses is that the longer you hold the property, the less money you make because you’re paying a mortgage without bringing in any income. You can lower that risk by living in the house as you fix it up.
3. Buy REITs (real estate investment trusts): Real estate investment groups are like small mutual funds that invest in rental properties. In a typical real estate investment group, a company buys or builds a set of apartment blocks then allows investors to purchase them through the company, though a lot of people aren’t aware that it is a way to trade real estate just like stocks and bonds.
Are REITs a good investment? The answer to this is yes, they are good investments, however, they can also be varied and complex. Some trade on an exchange like a stock; others aren’t publicly traded. It is important to pay close attention to the type of REIT you purchase as this can be a huge determinant r in the amount of risk you’re taking on, as non-traded REITs aren’t easily sold and might be hard to value. My advice? Budding investors should generally stick to publicly-traded REITs, which you can purchase through brokerage firms.
4. Invest In A Bigger Real Estate Deal: The beauty of real estate is that you can pool funds with other investors to invest in a bigger deal. This can be either commercial or residential.
There are two awesome things about investing in a larger real estate deal:
- Low minimums – depending on the platform you use, you can invest as little as 50,000 naira and be an owner of a property.
- You don’t have to be an accredited investor – in the past, to participate in these types of investments, you had to be an accredited investor, but that rule has gone away for certain investment types
If you’re looking to diversify your investments, but don’t have a lot of money to do it with, this could be a lucrative way to start.