The Many Ways to Invest in Real Estate

Whether you’re a seasoned investor or you’re just starting out, you’ve undoubtedly heard about the opportunities available in real estate. Unlike stocks, cryptocurrency, and other kinds of trading, investing in real estate is often considered “easier” or “safer,” and many people can get involved with real estate investments regardless of how knowledgeable they are about the intricacies of the stock market.

With that said, many believe that investing in real estate means simply buying property, but this is not the case. In fact, there are many other ways to do real estate investing, and this article is dedicated to giving an overview of some of the more popular methods. Keep reading to take a look at the many ways you can put your hard-earned money into real estate and get crucial insight into which kind of investment is the best option for your future goals and current financial situation.

Traditional Real Estate Investing 

Traditional real estate investing is all about purchasing different properties and then either selling them in the future for a higher price or renting them out. This type of investing is well-known to most people, and because of that, it’s more popular in the mainstream for people that already have the needed capital to purchase a property. 

If you own a house or have a mortgage that you’re paying off, you are making a long-term investment that the house will appreciate in value. Although, owning a house and living in it isn’t the only form of “traditional” real estate investment.

If you decide to buy property to rent out, you must first be certain that you feel comfortable being a landlord. In that position, you will be responsible for everything from paying taxes & insurance and taking care of the property to looking for tenants and dealing with any potential problems that may arise. 

The good thing is that if you’re willing to take on the responsibility, you have the opportunity to earn some good money. One way is through collecting rent, which largely depends on where the property is located and how well-maintained it is. The other way is through appreciation. In this scenario, if your property gets a rise in appreciation value, you may sell it at a profit or borrow against its equity and invest in another location. 

There’s a reason why traditional real estate is so popular — it’s easy to understand how it works, and it’s tangible. People can visit and look at their investments, so it feels more “real.” If you’re willing to deal with a few challenges, such as being a landlord and managing property, then it may be a good investment option for you. 

Flipping Houses 

If we have to make a comparison between flipping houses and owning real estate, it would be similar to trading vs long-term investments. Unlike traditional real estate investors, people who spend their time flipping houses will buy a particular property with the intention to own it for a short period of time and then sell it for a profit. To do that, they use two main approaches: 

• Update and repair: Here, the idea is to buy a property that you believe will increase in value if you make certain updates and repairs. In the best-case scenario, you buy the place, renovate as quickly as you possibly can, and then sell it for more than what you invested. 
• Hold and resell: This is the “long-term” version of flipping houses. Here, instead of getting a property and then fixing it, you buy quickly in a rising market, hold for a couple of months and then sell at a profit. 

The risky part of this way of investing is that you don’t know if you will be able to sell the property at a profit. This can become quite the challenge, especially since most flippers don’t keep enough money in cash to be able to pay for the properties long term. 

REITs 

REITs or real estate investment trusts are made when a corporation or a trust decides to put the money of several investors together in order to buy, maintain and sell income-producing properties. In most cases, REITs are bought and similarly sold on major stock exchanges to exchange-traded funds and stocks. 

In order for a trust to qualify as a REIT, it has to pay out 90% of the profits to shareholders in the way of dividends. In that way, REITs avoid having to pay corporate income tax, whereas if it were a standard company, it would have to spend quite a lot of money on corporate income tax. Instead, in this case, it gives that money in the form of returns that get distributed to each shareholder.

Similar to dividend-paying stocks, REITs are great for investors who want a regular income. However, they also have an opportunity for appreciation. In most cases, REITs invest in properties like malls, office buildings, mortgages, and healthcare facilities, and in comparison to all other real estate investments, REITs tend to be highly liquid. 

Real Estate Investment Groups 

REIGs are like small mutual funds for rental properties. If you want to be an owner of a rental property without all the troubles that you have to go through as a landlord, then being part of a real estate investment group may be ideal for you. 

For example, a company will buy a set of apartment buildings (this is a popular option) and then enable investors to purchase them through the company, thus making them part of the group. In this specific situation, a single investor can own one or more apartments or other self-contained living spaces, but the company that operates the investment group is in charge of managing them and taking care of everything from finding tenants, maintaining the property, advertising it, and so on. The company takes a portion of the rent in return for fulfilling management responsibilities.

With that said, there are several different kinds of investment groups. In one of the more common versions, the lease is under the name of the investor, and all the owners collect a portion of the rent as a safety measure against occasional vacancies. That means you will be able to pay the mortgage even if the unit you own is without a tenant. 

And last but not least, it’s vital to remember that the quality of the investment group depends on the other members of the group. At first glance, it may look very easy to get into real estate investments. Still, certain groups can charge exorbitant fees that make the investment not worth your time or money. Like with any other investment you decide to make, doing your research beforehand is vital. 

Real Estate Mutual Funds 

Real estate mutual funds often invest in REITs and other companies that operate with real estate. They give investors the opportunity to gain exposure to diverse real estate properties for a relatively small amount of money. Depending on their strategy and goals, REMFs give investors a broader selection of assets than what you typically see with individual REITs. 

On the other hand, much like REITs, these funds are liquid, which is one advantage. Another is that the fund provides its investors with analytical and research information, which includes things like details on the acquired assets and the management’s predictions for the performance of these real estate properties. 

In Conclusion

As you can see, there are many ways to start investing in real estate, from buying and renting property to participating in mutual trusts and funds. There’s even an additional option: to invest in the stocks of companies that are related to the real estates industry, such as companies that produce raw building materials or construction companies. 

With that said, if you’d like to get into real estate investing but are struggling to determine the best option for you, then Alpha Wealth Funds is here to help you. Our financial planners are ready to listen to your financial goals, evaluate your current financial situation, and set up a plan that will bring you the success you want to achieve with the help of your investment. 

Please feel free to reach out to me on this or any of your investment needs or questions. I may not always have the answers at my fingertips, but I promise I will get them for you. Michael Torrence

Calendly link https://calendly.com/mt-awf/intro Work: 435.658.1934 Contact: 330.284.3211
Michael Torrence – Investment Advisor Representative: Michael was born and raised in Ohio and attended The Ohio State University. After College, he was commissioned as a 2ndLt in the United States Marine Corps. He attended his initial training in Quantico, Virginia, then graduated at the top of his Primary Aviator Class and was selected for the Strike (Jet) Platform.

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