Real Estate Investment can provide high returns.
It also runs the risk of a deep-pocketed loss..
Essentially, all homeowners make an investment when they purchase a property, since homes generally appreciate in value. However, some people find that investing in properties outside of home ownership can amass a small fortune over time. There are several ways to invest in properties, each of which offers a different risk level, maintenance requirement and possibility of return.
Invest in a real estate investment trust, or REIT.
Real estate investment trusts work to pool the money of investors for the purpose buying, selling and developing real estate properties.
- As an investor, you will benefit from a hands-off approach, and the opportunity to invest in multiple properties at one time, ultimately diversifying your portfolio.
- The REIT holder is required to pay 90 percent of trust income directly to trust share holders for all taxable income derived from the rent or sell of a property. Real estate investment trusts are highly liquid, and they allow for investment in commercial property as well as residential.
Become a part of a real estate investment group to learn the ropes of investing in property.
Like an REIT, a real estate investment group pools the money of two or more people to purchase, develop, manage and sell properties. Because these groups are generally much smaller than real estate investment trusts, members can aid in managing properties, and learn tips and advice from other seasoned investors.
- A real estate investment group is private, and is required to pay profits only according to private contracts. *Additionally, investments with real estate investment groups are not as liquid as an REIT. Instead, one or more properties must sell before a member can withdraw from the group.
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Purchase a property to develop and sell.
These are called short term ownership investments, and present the opportunity for high profits.
- When flipping a property, choose a home, apartment complex, duplexes or a commercial building, with outdated features and needed upgrades.
- Negotiate a bargain with the seller for an as-is property, and install the upgrades needed to increase the property’s value.
- While you can hire a contractor for the work you need done, more self-repairs will result in a higher profit margin. Attempt to sell the home yourself before enlisting the help of a real estate agent, as agent fees average around 6 percent of the total home sale price.
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Become a landlord of a property to receive ongoing income.
Purchase or build apartments, homes, duplexes, or shopping centers. Search for foreclosure properties with a low price tag and tow maintenance. Avoid purchasing a property in poor condition.
- While some repairs such as new flooring or paint are expected when purchasing a rental property, others such as a new roof or foundation repair could obliterate the possibility of making a high return on your investment.
You can also check out our guide on When is a good time to Invest In a rental.