In this post we will look at how to invest in real estate and the advantages of doing so. Whether you are an experienced investor or just a beginner, Real Condo Experts will show you 7 easy ways of investing in real estate.
How to Invest in Real Estate
1. Buying Properties for Rent
If you are open to taking on the role of a property manager along with the daily responsibilities of its maintenance, then investing in a property to rent is a great option.
Just keep in mind that if you don’t want to manage the property yourself, you’ll need to pay a property manager.
Also, try to find a unit with expenses that are less than what you can charge in rent.
2. Renting out Rooms in Your Home
Alternatively, if you do wish to live in your rental property, you can buy bigger than you need and rent the extra space. Perhaps you want to rent out a room or two or even a separate apartment if you are wondering how to invest in real estate.
Don’t think that you have to have owned a condo or house before owning one to rent. Even college and university students have purchased properties where they lived in one room and rented out others to cover their mortgage and utilities.
If you are just starting out, this might be the best option for you so that you have some income to support you as you learn about home ownership and real estate in general. If you do decide to own another property, you’ll have more knowledge and expertise for the future.
3. Flipping: Fixer-Upper vs. Hold and Re-sell
If you are a handy person or willing to learn, flipping a property might be a good investment for you. What’s even better is having a partner to help you, specifically a contractor or someone who possesses the skills you lack.
Flipping a property does involve risk because it is difficult to predict all the work that needs to be done and to accurately price it. Also, the longer repairs take, the longer you may lose on your investment unless you are able and willing to live in the condo or house while it is being fixed up.
That being said, the real estate markets can change, so you might decide to buy a property, hold onto it, and then resell it when the market is in your favour. In the meantime, you can rent the property, earn passive income, and benefit from the increase in your property’s value when you do decide to sell at a later time.
For more about flipping vs. holding a property, check out this article from Investopedia, “Should You Buy and Hold Real Estate or Flip Properties?” By Robert Stammers.
4. Invest in a Real Estate Investment Trust (REIT)
If you don’t want to be the one to buy and manage a property yourself, investing in a REIT might be for you.
According to Investopedia.com, “a real estate investment trust (REIT) is a company that owns, operates, or finances income-producing properties”.
Like other stocks or mutual funds, you can buy trust units. Your money is then part of a pool of money which the REIT uses to buy and manage all sorts of real estate (industrial/commercial buildings, apartment buildings, hotels, etc.).
Moneysense.ca explains that “the REIT collects rental income, pays its expenses and then distributes almost all its remaining income—usually 85% to 95%—to unit holders.”
If you are new to this type of investment, it is advised that you invest in publicly traded REITs first.
5. Invest in a Real Estate Investment Group (REIG)
REIGs manage units and maintain the property for you. So, this is another good investment choice if you don’t like the idea of property maintenance.
According to Investopedia.com, “In a typical real estate investment group, a company buys or builds a set of apartment blocks or condos, then allows investors to purchase them through the company, thereby joining the group”.
Finder.com warns, “When you invest in property through an REIG, your name is on the lease, but a portion of your owed rent is deducted to cover maintenance costs. You’ll also need to be wary of vacancy risks — although your REIG may ask investors to contribute a portion of the rent to safeguard against empty units”.
6. Invest in a Real Estate Limited Partnership (RELP)
When you are part of an RELP, you are pooling your money with other investors to buy, lease, develop, and sell properties which you passively own and profit from. A RELP is a private investment and typically requires a higher minimum investment than REITs.
According to Businessinsider.com, “REITs [are] much easier to buy and sell than RELPs, and their pricing more transparent”.
7. Engage in Online Real Estate Investment Platforms
Relatively new in the realm of real estate investments are online real estate investment platforms or crowdfunding.
If someone doesn’t have the required minimum amount of money to invest in real estate, these online platforms allow people to pool their money with others to invest in private real estate. You can open an account with as low as $500.
For a list of the best online platforms, check out this article by Ryan Scribner from Investingsimple.com. Keep in mind that some of these platforms only allow accredited investors – but not all of them!
Advantages of Investing in Real Estate
Learning how to invest in real estate is of benefit to you because there are advantages to this type of investment. While there are risks involved in any investment, real estate is generally a safe investment. Even if you don’t make a lot of money investing in a property, it can provide you with housing or rental income.
Investing in real estate is also attractive because of low mortgage rates and tax benefits (you can even write off the expenses of maintaining a property).
Whether you are a beginner or an advanced investment expert, when it comes to investing in real estate, there are a variety of options out there for people at all stages.
Read more about how to invest in real estate from Weathsimple.com.
Whoever you are, and at whatever stage of investing you find yourself in, Real Condo Experts can help you explore condo ownership – whether you wish to live in it or rent it out for extra income.