Hello World! Welcome Friends! Real estate is the cornerstone of a comprehensive investment portfolio, and it can yield high returns when done right. If you’re just starting out on your journey as a real estate investor and don’t know whether to go with commercial property, residential, or one of the newer options on the market, you’re in the right place. Read on for a breakdown of the five best ways to invest in real estate.
1. Traditional Real Estate Investment
Traditional real estate investment means buying property for yourself. This could either be a piece of land, an apartment building, a strip mall, or even a hotel. It all depends on your experience, confidence, and the amount of money you have to invest.
If you choose this method, you’ll either search for deals on your own or work with a broker to guide you through the process. Just make sure you have the proper team around you, including a good real estate agent, a CPA, a broker, a lawyer, and a manager you can trust.
2. REIT
REITs – an acronym for Real Estate Investment Trusts – have been around since the 60s. The term refers to a private or public company that owns profitable real-estate. REITs are almost always comprised of commercial property, such as strip malls, retirement estates, plazas, shopping malls, and the like. REITs must earn 75% of their gross income from real estate and distribute 90% of their taxable income to shareholders in the form of dividends.
The best part is, REITs are known for paying extraordinarily high dividends, meaning they can be a great source of passive income for retirees.
3. Online Crowdfunding
Online crowdfunding companies allow you to invest in actual, tangible real estate, such as a condominium complex or a shopping mall, without the headache of managing the property. Investing in one is a great way to earn passive income through real estate while owning a tangible building instead of a piece of a company like you would with REITs.
4. Syndication
Real estate syndication starts with a deal presentation from a sponsor whose job is to pull funds from different investors to acquire prestigious real estate. Syndication is akin to online crowdfunding, except you’re working more intimately with the sponsor and the team behind the deal. If you go down this path, be sure to ask plenty of questions to make sure you’re clear about what the deal entails.
To participate in a syndication deal, you must be an approved investor with a minimum net worth of $1 million or an income of $200,000 or more per year. This makes sense considering that syndications start at $50,000.
How does it work? The sponsor pitches the deal and then gets compensated for putting it together. Not only does the sponsor get a piece of the deal in the form of equity, but they also receive an acquisition fee and a management fee. If you opt for the syndication route, make sure the sponsor you’re working with puts their own money into the deal and actually believes in the project.
5. House Flipping
House flipping is when you buy a property for a certain amount and then sell it for twice, thrice, or even quadruple that amount. There are plenty of off-market deals that are perfect for house flipping. So, this can be a lucrative option for someone with a high-risk tolerance.
Whether you flip houses or build your portfolio one property at a time, it’s never too early (or late) to start investing in real estate. Choose a route that works for your personality, and the sky could be the limit!
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