How to start investing in real estate
Thinking of starting to invest in real estate or real estate? If you've ever been a tenant in a home, you probably remember all the associated inconveniences: calls about things not working and clogged toilets don't seem like a good bet at first glance.
But done wisely, real estate investing can be highly lucrative. Not only can it help you diversify your current investment portfolio, it can also provide an additional income stream. The best of all? That many real estate investments do not require the investor to introduce himself to every tenant.
The problem here comes when the investor does not know where or how to invest in real estate. Here are some of the best ways to increase your equity by investing in real estate.
1. Choose REIT
El REIT It is a type of investment company that offers you the ability to invest in real estate without having to shell out large amounts of money.
They are companies that have commercial real estate, such as office buildings, commercial premises, apartments and hotels. A REIT is convenient for its high dividend payment, very popular with those who want to invest in retirement. If you are an investor who does not need or want the regular income, you can automatically reinvest those dividends to further increase the investment.
Many new investors are looking to stick with publicly traded REITs, which you can manage through an online broker. REITs can be a good investment, but they can also be complex and varied.
2. Decide on an online real estate investment platform
There are companies that specialize in connecting borrowers with investors interested in lending money for various needs, such as online real estate investing.
These types of platforms can connect real estate developers with investors looking to finance a project, through debt or equity. Investors expect to receive the monthly or quarterly distribution, in exchange for assuming a significant amount of risk and paying a fee to the platform. Like many real estate investments, these are speculative and illiquid.
3. Consider investing in rental properties
By investing in houses it is possible to live in the investment property while renting the rooms or units. For example, you can find a domain with five bedrooms and five bathrooms that is configured in the style that students are looking for. You can buy it, live in one room and rent the other four.
With the proper setup, you can cover all expenses and bring in an additional amount per month in cash.
Some investors choose to use the so-called "home piracy", an online resource for real estate investors to easily monetize their investment. Basically, it consists of occupying your investment property, either by renting rooms, or by renting units in a multi-unit building. Home hacking allows investors to purchase a property with up to four units, and still qualify for a residential loan.
There is also the possibility of buying a complete investment property, with combined expenses less than the amount you can charge for rent. If you don't want to be the one to deal with the management of the home personally, you will also need to include the property manager's payment in your investment equation.
Although if you manage the property yourself, you will learn a lot about the sector, which will allow you to make investments in properties in the future with more experience.
4. Think about investing in investment property
The investment process is basically simple: invest in a cheap house that needs a little TLC, renovate it cheaply, then resell it for a profit. However, this strategy can be a little more difficult than it appears on television.
Take the element of risk into account, as part of the post-investment calculation requires a very precise estimate of how much the repairs will cost. This is usually not an easy thing to do.
The solution? Find an experienced partner. If you have the capital or time to invest, you may want to find a contractor who is capable of estimating project expenses.
Another point to take into account is how long you will own the property. The longer you own the property, the less money you will make, as you are paying off a mortgage without generating any income. You can reduce that risk by living in the home while you repair it. This is recommended as long as most of the updates are cosmetic and you don't mind a little dust.
5. Rent rooms
Finally, to finish diving into the world of real estate investments, you can also put your house up for rent using platforms such as airbnb. The advantages are multiple:
- You do not need to find a long-term tenant.
- Potential tenants are at least shortlisted by Airbnb.
- The company's host guarantee gives you protection against damage.
Renting rooms is a much more accessible way than the sophisticated concept of real estate investment.
Keep in mind that the best investment decisions are the ones that work best for you. Reflect on how much time you have, how much capital you are willing to invest, and whether you are willing to deal with home problems that inevitably arise. If you don't have the necessary skills, you can always invest in real estate via a REIT or crowdfunding platform, rather than directly on a property.