Real Estate Investment Guide: When and When Not to Buy

real estate investment guide when to buy and when not

Risk is an intrinsic feature of all kinds of investment, and real estate investment is not an exception. To ascertain the worthwhileness of any real estate investment in the modern age, it is important that you thoroughly research and understand all your options.

You also need to know and understand the risks involved and take necessary precautions. Such precaution may include you having to avoid working with companies and lenders whose practices are questionable.

You should however note that you can invest in real estate without having to actually buy a property. In this article, we will consider how to invest in real estate by buying property, and how to invest without buying too.

Read also our post on the Best investing Strategy here.

7 Ways to Invest in Real Estate by Buying Property

Buying property is the simplest and most direct way to invest in real property, but the concept of real property investment involves more than ownership. Below are 7 ways to invest in real estate by actually buying a property.

1. Buy and improve a home

In simple terms, what you have to do here is buy a home, make necessary improvements on the property, and sell at a price that is higher than the amount invested in both buying and improving the property.

You should know, however, that this process is time consuming and requires a deep understanding of real estate and home improvement. In this choice of investment, even profitable investments may initially look like a waste of time and money. So, patience my friend is the key!

2. Rent-To-Own A Home

Rent-to-own is a real estate investment option in which you sign a contract with the landlord to rent the property for a fixed period of time, after which you will buy the house. A percentage of your rent goes toward the down payment on a mortgage as soon as the mortgage becomes official.

This option is good for people with other loans as it allows them the needed time to pay off without the added financial burden of a monthly mortgage. Carefully read the contract to ensure that the conditions are in your favor.

3. Buy Rental Property

There are two major ways to go about this: you could purchase an entire property and rent them out to tenants, or you could simply rent out some of the rooms in the house you stay in. Either way, you are a landlord, and a steady flow of income is guaranteed, all things being equal.

Keep the property in good condition in order for it to command high rental value, you may also decide to hire a property manager to deal with repairs and maintenance.

4. Purchase Vacation Property

Vacation properties refer to properties that are rented out for short periods. And if you have a property in the right location, it’s very possible you make more money off a few vacation tenants than you would, from a year-round tenant.

Vacation properties are usually both expensive to buy and maintain due to the fact that it’s often in desirable locations, so be sure you have what it takes to make such investment.

5. Use Lodging Apps Like Airbnb

Lodging apps are a nice way for property owners to supplement their income, and you may be able to make a decent profit with the help of Airbnb. Why not try it out?

6. Purchase commercial properties

For those not willing to invest in residential properties, commercial property investment is a nice option. It is a high-risk, high-reward kind of investment.

Income made from commercial property investment is usually relatively higher than those made from residential properties.

7. Buy your house and live in it

It’s as simple as that: buy your house and live in it! Just ensure that you subject it to a regular repair and maintenance routine to maintain its market value.

And if the day comes when you eventually decide to give it up for sale, you will smile at your bank account.

7 Ways to Invest in Real Estate Without Buying Property

1. Invest in real estate investment trust (REITs)

REIT refers to a company that either owns or finance income producing real property.

One thing you need to know is that 90 percent of the taxable income it pays is through dividends to its shareholders, so all you need do is research thriving REITs and buy their shares.

2. Investment in real estate mutual fund

While REIT is an actual company, mutual funds are simply investments pooled together and controlled by an investment manager. It allows investors the liberty of having both mutual funds and real estate.

As a diversified asset, the aim is to mitigate risk, note however that they are still vulnerable to risk and invest wisely.

3. Investment in real estate ETFs

While REITs invest in real estate, REIT ETFs invest in REITs. An advantage of ETFs is that it is generally less risky than investing directly in REITs, but as a general rule too: the lower the risk, the lower the return.

4. Wholesaling houses

Wholesaling houses refers to the act of finding an undervalued house and being a middle man between a potential buyer and seller, in order to sell to the buyer at an increased price, thus making profit.

5. Online real estate investment platforms

There are several online platforms that help you make real estate investments. Some of them include RealtyShare and Fundrise.

6. Real estate partnerships

Under real estate partnership, you can simply pay the mortgage, while your partner handles the down payment. It’s a nice way to invest in real property with limited funds and less hands-on work of owning property.

7. Investment in real estate service companies

Companies involved in real estate without involvement in the buying of properties are a fantastic way to both diversify your portfolio and get a good knowledge of the real estate market.

Other ways to invest in real estate without necessarily buying property include investment in home construction companies, becoming a real estate appraiser, and starting a Brokerage or becoming a real estate agent.

How Much Money Is Needed in Order to Invest in Real Estate?

There is no fixed amount for this, it depends on the form of investment you plan on doing. Of course, buying property is especially expensive, on a general note though, once the investment requires buying of property, it’s likely you will need tens of thousands of dollars.

And if you don’t have such a high amount, then it is advisable you invest in REITs, as you may invest in REITs with as low as 500 dollars. It is lower than other real estate investments and you also have the chance of earning dividends on them.

As a fair word of advice, try having at least 500-$2000 saved up for possible investment.

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Is Real Estate a Good Investment Option?

Real estate has a lot of potential as an investment option, however, it being a good investment option or not largely depends on your current financial state.

So properly make research on the investment option you are about to go into and be sure it’s suited to your current financial situation, that is when it will be a good investment option for you.

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Tags: how to invest, how to start invest, Investment, real estate investment

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