Those who have always had a landlord will never dream of being one. Answering calls about the bugs and overflowing toilets is not the most glamorous job and one would not happily jump on it.
But if you do it right, real estate investing is highly lucrative. It will help diversify the investment portfolio and can become an additional income stream.
A lot of real estate investments do not require you to show up at the tenant’s call. A lot of new investors do not know how and where to begin their investment in real estate. Here are some ways to get you started.
1. Buy real estate investment trusts
Real Estate Investment Trusts (REITs) will allow you to invest in real estate without owning the property. It is similar to mutual funds and REITs are companies that own commercial real estate.
They pay high dividends which makes them attractive for investors. If you wish, you can directly reinvest the dividends to grow the investment.
Some REITs trade on the exchange but you need to be careful about the type of REIT you buy. They cannot be sold easily and are hard to value. It is best to stick to publicly traded REITs that can be bought from brokerage firms.
2. Online real estate investing platform
There are several companies that connect investors and borrowers. They will connect the real state developers with you.
The developers are looking to finance projects through equity or debt and you receive a monthly or quarterly distribution in exchange for taking the risk. This investment is illiquid and highly speculative.
But you will need money to make money and these platforms are only for accredited investors. So, if you have a high net worth, you can consider this option.
3. Consider house hacking
House hacking can allow you to own a property, live in it, and rent out the other rooms or units. You can buy a property with four or five rooms, live in one, and rent out the other three.
It will cover your expenses and will also allow you to make the mortgage payment. If you are above 60, try to understand the different reverse-mortgage pros and cons (see here) and how it works before you make the decision.
You simply occupy a part of the property and rent out the other. Of course, you can also purchase and rent out the entire investment if you do not want to live in it.
But in this case, you will have to look after the property and always be available at the beck and call of the tenants. If you manage the property yourself, you will learn about the industry and will have more experience buying other properties in the future.
4. Flip investment properties
It is a strategy that you may have seen on television. But when you get into flipping, you need an exact estimate of the amount you will spend on repairs. If not, there will be a high element of risk.
You can also consider working with a partner who is good at managing the property or has knowledge in estimating the expenses. There is a risk of holding the property for longer.
You will have to pay a mortgage without bringing in any income so the sooner you flip it, the better it is. Alternatively, you can lower the risk by living in the house while you fix it up.
5. Rent out a room
If you are ready to become a landlord, you can consider renting a part of your home using a site like Airbnb. You will not have to take a long-term tenant and the renters will be pre-screened by Airbnb.
This will save a lot of trouble as the demand for Airbnb properties is on the rise. It is also easier to handle than the concept of real estate investing. If there is a spare room, you can rent it.
Like any other decision, you need to make a real estate decision very carefully and it should best serve you. You need to identify the amount you are willing to invest, the time you have, and whether you are happy to deal with the household issues or not.
If you do not have the DIY skills, you should consider investing in real estate through a crowdfunding platform or REIT instead of directly buying a property.
These are just a few ways you can invest in real estate but if you are looking to own the property, you need to make a well-thought decision because you cannot go back on it.
Consider your savings, mortgage, and ability to make the repayment on time before signing on the property documents.