How to Invest in Real Estate: Tips for Making the Right Choice

It’s no secret that real estate is one of the most lucrative long-term investments. However, property investing can be a relatively lengthy and confusing process. 

But don’t worry!

With our detailed guide on how to invest in real estate, you’ll be prepared to face whatever is thrown at you during your endeavour. So, let’s dig in, shall we?

What are the Best Ways to Invest in Real Estate?

If you want to invest in real estate but don’t know where to start, we’ve got you! 

Before starting this investment journey, you need to think about the best way to go about the process. With that said, we’ve compiled a list of the most popular methods of investing in property that would make the procedure as painless as possible. 

1. Buy REITs

The abbreviation REIT stands for “Real Estate Investment Trust,” a company that operates and owns real estate that generates income for multiple investors. In a sense, REITs pool the income of numerous investors so that each of them earns dividends without having to buy any property themselves. 

Furthermore, you can invest in REITs by buying a company’s stocks through a broker. REITs appeal to many real estate investors because they are easy to buy and sell and provide stable annual dividends. What’s more, this is an excellent way for investors to create a presence essential to a good real estate portfolio.

2. Use an online real estate investing platform

Real estate investing platforms (or so-called real estate crowdfunding) pool many investors’ money and use it for different real estate projects. A significant advantage of using platforms for investing in real estate is that the process is entirely online, and it’s popular with accredited investors.

You can invest in private REITs and even access private real estate development projects using these platforms. In addition, you might gain exposure to properties for around $500. Therefore, these sites can give you assets usually reserved for wealthy investors. 

Lastly, crowdfunding platforms are a superb portfolio investment, allowing you to access real estate without owning or managing any properties. What a dream!

3. Invest in rental properties

Putting your money in rental properties is one of the best real estate investments available. This process is relatively straightforward, and investors can quickly see the fruits of their investment if the property appeals to many tenants. 

However, investing in a rental property requires a lot of research and reflection beforehand. One of the reasons is that landlords need to secure around 20% rental property down payment

On the other hand, an advantage of buying a rental property is that they allow owners to invest in both homeowners insurance and landlord insurance that cover most property damage and lost rental income. 

4. Think about flipping investment properties

If you have a knack for interior and exterior design, house flipping might be the ideal investment opportunity for you. By flipping properties, investors mainly concentrate on purchasing and reselling. Therefore, you can generate a steady income flow through frequent flips.

Like most other investments, the goal is to buy low and sell high. However, to do that, investors need to ensure the property has been significantly upscaled to justify a price jump. When you invest in properties that need a little work, you can simultaneously creatively engage yourself and get some money out of it. That’s a win-win in our book!

5. Rent a room

If you’re looking to learn how to invest in real estate, but you aren’t ready to go all out yet, you should consider house hacking. An advantage of this investment type is that you can make money with a single property, especially if you rent it to multiple tenants.

As the property manager, you have many responsibilities towards the house (or apartment) and all its tenants. Therefore, you should ensure that you’re ready to tackle these obligations before committing to being a landlord.

What are the Best Ways to Invest in Real Estate

How to Get Started With Real Estate Investing?

Before settling on real estate as your investment opportunity, there are some key points you should keep in mind. With this knowledge, you can ensure the process runs smoothly, and your money is invested correctly. 

Pick a strategy

When considering real estate investing, the first thing you should do is pick a strategy to follow. Fortunately, our above selection provides relevant information on the best investment strategies. Go through them and think about which one is right for you. There is no right or wrong decision because it depends on the individual investor. 

Save some money

Saving some money before attempting to buy real estate can significantly help you get closer to investing. One way of upping your savings is opening up a real estate account in your chosen bank. That way, you won’t be tempted to spend this money because you’d have a separate personal one. Additionally, you can take out a personal loan, but mind the bank’s interest rates.

Find a team

Real estate investing is not a one-person show. On the contrary, to ensure you’re getting the most of your investment, it’s crucial to have a team of experienced professionals to help you. Therefore, your team should have a real estate agent, a mortgage professional, an attorney, an insurance agent, an appraiser, and a contractor.

Do research

Needless to say, this tip isn’t that revolutionary, but it’s worth mentioning. Before you do anything involving your hard-earned money, you should research, research, and research some more. Look into real estate partnerships, brokerage firms, depreciation methods, and rental property mortgages. Trust us; you can never be too informed!

Close the deal

So, you’ve done all of the above, and it’s time to close the deal. Even though this is the final stage of your investment, it can still be tricky. Therefore, you should arm yourself with private mortgage insurance (and any other insurances you might need), an attorney, and a thorough home inspection. Finally, when all this is over, you’re officially the owner of a new property!

You might be interested: How to buy a House in Canada?

Why Invest in Real Estate?

If you’re still not sold on the idea of property investing, we’ve listed some pros and cons that will hopefully guide you in the right direction.

Pros:

  • Real estate investments are an excellent source of steady income, especially if you’re renting to long-term tenants
  • You’re able to reduce volatility in your real estate portfolio
  • Real estate investors have acquired great riches from investing, as it is a very lucrative opportunity
  • Real estate income is usually subject to gradual increase, especially if your property value appreciates

Cons:

  • Properties can’t be in tip-top shape all the time, so they would require regular maintenance, which might put a strain on your budget
  • Real estate is variable, so when demand is low, your property might not be rented out for a while, which would cause you to lose money
  • Buying and selling real estate comes with high transaction costs, especially if your property value depreciates
  • Real estate maintenance is relatively time-consuming because you’re essentially taking care of more than one living space

Why Invest in Real Estate

Finishing Thoughts

So, is real estate a good investment

We vote yes because the pros can dramatically outweigh the cons. Hopefully, you’ve acquired most of this valuable information and are ready to start thinking about how to invest in real estate. Keep the points mentioned above in mind to ensure the best outcome from your investment. 

Happy house hunting!

Related article: Real Estate Statistics

FAQ

How to become a real estate investor?

To become a real estate investor, you’ll need a thorough understanding of the real estate market, an investment strategy, have some money to spare, and learn the laws of property investment. 

How to make money from rental properties?

You can make money from renting rooms or properties by finding paying tenants to live in them. That way, you’ll have a steady source of income for as long as they live on your property.

ABOUT AUTHOR

Despite her formal background in linguistics, Maja has always been fascinated by the world of finance. She has spent years and years analyzing the market, including trades, investments, pitfalls to avoid as well as the stock exchange. As of recent, she has been studying some non-mainstream stocks in Canada. When I’m not immersed in numbers, I like to spend time with my dog and plan my next trip.

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