Buying January 22, 2024

Real Estate Investing 102

Investing in Real Estate

Real estate investing is a great way to diversify your assets and build wealth. Once you understand the risks involved, it’s important to understand different types of investing. Interested in investing in real estate? Here are three ways you can invest well in real estate.

House Flipping

How it works. Flipping is the act of purchasing a property (often in relatively poor condition), performing repairs and renovations, and then quickly selling the refurbished house for a profit. While some may struggle to do this successfully, many people make significant income flipping houses.

Doing it successfully. To successfully flip a property, you generally need to take several steps outside of the normal home-buying and selling procedures. Since not every neighborhood is a good fit for flipping houses, you need to do a lot of market research. Before buying your first house, you’ll need to secure reliable financing and build relationships with contractors. Unless you plan to do the work yourself, part of learning how to successfully flip a house is building a reliable network of general contractors, roofers, electricians, painters, painters and HVAC experts. You’ll want to get to know several lower-cost, well-rounded handymen as well.

Getting help. Purchasing, rehabbing and selling a home is a labor-intensive process that shouldn’t be taken lightly. It’s important to work with an experienced real estate agent. Not only can the agent help you sell the refurbished property at a profit, they can help you conduct market research, find and assess properties, connect you with reputable contractors, and avoid potential missteps.

Crowdfunding Investments

What is real estate crowdfunding? Simply put, it’s a way to invest in real estate projects without purchasing a property individually. Instead, investors pool their money together to fund a project, and then share in the profits or losses. It can be a good way to diversify your investment portfolio and gain exposure to the real estate market.

What are the different types of crowdfunding investments? There are two main types: equity crowdfunding and debt crowdfunding. Equity crowdfunding allows you to purchase shares in a real estate project, thereby owning a portion of the property. With debt crowdfunding, you lend your money to a real estate developer or another borrower in exchange for fixed-income payments and interest.

As with any investment strategy, crowdfunding for real estate has both advantages and risks. ​​​​​​​Be sure to do your research and consider starting small to get familiar with the process.

Real Estate Investment Trusts

What are they? Real Estate Investment Trusts (REITs) are companies that finance, operate or own income-generating real estate. ​​​​​​​Much like stocks, REITs can be publicly traded, allowing investors like you to buy and sell shares on major exchanges. This means you get access to all the advantages of real estate investment – income generation, inflation protection and growth – without having to purchase a property on your own.

Income potential. Most REITs distribute at least 90% of their taxable income to their shareholders each year as dividends. This means you will have regular income and the potential for long-term capital appreciation.

Accessibility. REITs make it easy for you to invest in real estate without having to buy physical properties. You get to own a piece of premium real estate – from shopping centers and offices to houses and apartments – starting with a small initial investment that can grow over time. REITs can help diversify your portfolio beyond traditional stocks and bonds. They also allow you to invest in various property types across different geographic regions, providing even more diversification to maximize your returns and minimize risk.

At ERA First Advantage Realty, we know experience matters. We would love to talk to you more about your real estate goals and share our professional knowledge with you. Connect with a local ERA agent today!