How to Invest in Real Estate
An investment in real estate can be very satisfying and profitable if done the right way. Do it wrong, and you’re at risk of losing your hard-earned money. Real estate, unlike many other investment opportunities, can be comparatively safe if you make the right decisions. Although all investment does include a bit of risk, if you plan things smartly, you can save yourself the loss and may even be extremely profitable for you.
Rent out your land.
Rental properties can generate a stable income. This means the return on your investment is fast and regular. However, it requires careful planning and close auditing once the investment is made. Investment in rental properties does not require a large amount of investment and may even be tax-deductible if you play your cards right. You may have to initially invest more than just the amount for the land, but once everything is set up, the return on your investment will be instant.
There are two types of rental properties that you have the option to invest in.
Residential property is the easiest to get a return on your investment. These are usually available on a mortgage, and by the time you are done paying, it will be worth more than the amount you spent. On top of that, you can rent it out to get a monthly income alongside it. Although this does require some consideration regarding the location and tax, plus any surplus you need to invest on top. If you carefully plan everything it’s a recipe for success.
These types of properties might be difficult to acquire, but if you get an opportunity, you are good to go. Since the rent on commercial properties is very substantial compared to its residential counterpart. This will require a larger amount of investment, but if you are looking to generate a return as quickly as possible, a commercial building or space may be the best solution for you.
Partner with a Real Estate Investment Group (REIG)
This approach can also generate a considerable amount of income, although it will require you to research and then carefully consider the percentage you will receive from the profit of your investment.
How do the REIGs work? Real estate investment groups are similar to small mutual funds. This will allow risk and a high-profit way to generate a stable income while still being involved in the administration.
The way these groups work is that the investment group would typically build a set of apartment blocks or condos and then allow multiple investors to purchase one or multiple units through the company. That way, the investor would be part of the group. All the maintenance, handling and other vacancies would be handled by the company in exchange for a percentage of the monthly rent or your overall profit.
The advantage of investing your money with an investment group is that your money is safe and the income is stable even if your unit is vacant. All the investors pool a portion of the rent to help the unit that is vacant. This way, you are protected against any loss. It is also a great opportunity for investors who want to generate income but are not willing to take part in the management of these assets.
Real Estate Trading
Real estate trading is the process where an investor buys a property and flips it for a profit. This means that they buy a property off the market price and invest in its design and amenities to eventually sell it for a considerable profit.
The risk of this type of investment is low but compared to the other two, it may involve some risk, and the income generated is not stable. Keeping in mind the disadvantages it is still a good option considering you will be able to control and manage every detail.
Real Estate Investment trusts
How REITs work is that a REIT is created when a corporation (or trust) uses investors’ money to purchase and operate income properties. REITs are bought and sold on the major exchanges, like any other stock. A corporation must payout 90% of its taxable profits in the form of dividends in order to maintain its REIT status. By doing this, REITs avoid paying corporate income tax, whereas a regular company would be taxed on its profits and then have to decide whether or not to distribute its after-tax profits as dividends.
Like regular dividend-paying stocks, REITs are a solid investment for stock market investors who desire regular income. More importantly, REITs are a highly liquid asset because they are exchange-traded.
Whether you invest in real estate to generate rental income, or to let them sit until the perfect selling opportunity arises, it is a considerable investment strategy because by paying a relatively small part of a property’s total value upfront, you will be generating an income that is stable and low risk. But as with any investment, there is potential within real estate for both profit and loss..