How to Invest in Real Estate: 5 Simple Ways

strategies for real estate investment

Real estate investing offers a multitude of possibilities, ranging from obtaining a home mortgage to establishing a property portfolio. While building a lot of properties might be a lofty goal for many, there are plenty of other viable options. Here, we have practical strategies to incorporate real estate into your investment portfolio.

Here in this blog we will discuss the real estate strategies that can help you understand investing in real estate for maximum ROI or profit.

5 Ways to Invest in Real Estate

A successful real estate investment is one with a good return on investment. It’s crucial to balance the level of risk involved with the potential return. Even if you opt for investments with a high probability of success, it’s not a guaranteed outcome. It’s important not to invest money in real estate or any other investment if you cannot afford to lose it.

While traditional mortgages typically require a 20% to 25% down payment, in some cases, a 5% down payment is sufficient to acquire an entire property. Here are five key strategies through which investors can generate income from real estate:

1. Real Estate Investment Trusts (REITs)

If you want to invest in real estate without needing a lot of money upfront, you can consider looking into real estate investment trusts (REITs). These companies collect money by selling shares of stock and bonds. They utilize the funds to buy and lease real estate assets like malls, offices, apartments, and warehouses. REITs have to give most of their profits as dividends to their investors.

With REITs, you don’t have to worry about managing real estate. The company takes care of all the details of owning and renting properties. You can simply relax and earn dividends, which are often higher than what you get from other stock investments.

Buying and selling REIT stocks is quite easy. You can do it through a brokerage account. This makes REITs one of the most flexible real estate investments. You can also buy shares in exchange-traded funds (ETFs) that own shares of various REITs.

2. Crowdfunding Real Estate Platforms

If you want to be more hands-on with your investments, opt for crowdfunding real estate platforms. These websites let you invest in specific real estate projects instead of investing in big groups of properties.

On these platforms, money from different investors is combined to fund projects. Usually, this involves investing in real estate for a long time, often five years or more. While some platforms might let you take out some money early, they get to decide, and there could be penalties.

These platforms may charge fees for using their services, which can reduce your profitable amount.

3. Invest in Your Own Home

Most people invest in real estate by buying a home to live in. You get a loan, make monthly payments, and slowly become the owner of your home. If the housing market is good when you sell, you can make money from the increased value of your home.

But, investing in your own home doesn’t always give you big returns. Even though some places see higher increases, your home might not grow in value a lot, especially when you consider costs like maintenance, repairs, insurance, property taxes, and mortgage interest.

Other real estate investments, like REITs, have shown much higher average returns.

This doesn’t mean you shouldn’t buy a home or see it as an investment. Government support for mortgages and programs for first-time homebuyers can help you get a home at a much lower cost than other real estate purchases.

4. Invest in Rental Properties

If you’re thinking about real estate investment in a big way, consider buying properties to rent out. Renting can bring in a regular income and might even increase in value over time, but it’s one of the more demanding ways to invest in real estate.

There are two main ways to make money with rental properties:

  1. Long-term rentals: These properties are meant to be rented for at least a year and ideally generate a steady monthly income, though it depends on having reliable tenants. You could purchase a multi-unit property or a single-family home to rent out.
  2. Short-term rentals: These properties serve temporary tenants, who may stay for as little as one night. You might rent out your entire home or invest in a separate property specifically for short-term rentals.

While investing in real estate through rental properties offers the potential for higher profits, it also comes with a lot of work. You have to find and screen tenants, cover ongoing maintenance, handle repairs, and deal with any issues that come up.

To make things easier, you could hire a property management company, but this would reduce your profits. Also, financing rental properties might be more expensive compared to the resources and low interest rates available for primary residences.

5. Invest in Real Estate by Flipping Properties

Making big profits in real estate doesn’t always mean buying rental properties. Another common approach is buying and flipping homes. Flipping involves renovating houses and finding neighborhoods on the rise where you can sell the homes profitably.

If your strategy includes fixing up and building, it comes with extra risk and high costs. You’ll need permits for renovations, and expenses might be higher than expected.

To make flipping easier, look for homes in up-and-coming areas that don’t need major renovations. Renting the property while waiting for values to rise can be even more profitable.

Is It Worth Investing in Real Estate?

Investing in real estate can bring good long-term profits. However, buying and managing physical properties can be expensive and risky. For those with limited funds or not looking for a permanent home, Real Estate Investment Trusts (REITs) might be a better option.

If you choose to buy rental properties or flip homes, be aware of the risks and have a clear plan to recover your investment. Remember, real estate can be hard to sell quickly. If you’re unsure about starting real estate investing, it’s wise to consult with a financial advisor for guidance.

Feel free to reach us at BFPM for any queries.

Trevor Henson

Trevor Henson is an experienced entrepreneur (10+ highly-successful start-ups) and property investor with a demonstrated history of building and leading teams in investment property management environments, maximizing returns for property owners, and optimizing properties through construction management and re-positioning. He…
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Frequently Asked Questions(FAQs)

Certainly! Investing in real estate offers advantages such as passive income, steady cash flow, tax benefits, portfolio diversification, and the ability to leverage assets.

Beginners can start investing in real estate by researching, saving for a down payment, considering low-risk options, seeking advice from experts, and gradually expanding their portfolio as they gain experience.