If you are interested in investing in real estate, then you should take a look at this guide and learn the main things about the market.
Investors are always trying to diversify their portfolio in order to lower risks. Real estate investment is usually a safe bet, but sometimes it can be a bit overwhelming.
That's why we've gathered all the information you may need before investing in this market.
Smart ways to invest in real estate
As a homeowner
If you do own a house, you can become an investor in real estate in two ways. The first one is through rent, which lets you generate physical income that you receive every month with rent payments. In this case, it becomes evident that you're investing by owning a house, as you're making money out of it in hopes of earning more than its initial cost.
Check these 5 things to know about renting out space in your house!
On the other hand, you can also invest in real estate simply by owning a house and living in it. Unlike the value of cars, the one of houses tends to rise in time. This is due to the house's appreciation. In other words, your home's value tends to grow over time. If you chose to sell your house, it's highly possible that you'll make some profit.
You can find many advantages in investing in real estate with a house or apartment that you actually own. Firstly, it's the traditional way to do it. Returns are usually higher if you play your cards right. Additionally, owning a house literally puts a roof over your head, which is something other investments can't do.
As for the disadvantages of this kind of investment, there are also a few to consider. It's not for a lot of people; you need the money, patience, and skill to pull it off. If you mess up, losses can be pretty hard. Essentially, it's a highly risky investment with potentially high returns.
As a member of a real estate investment platform
With the power of technology, new doors have been opened and there are more ways to invest in real estate. One of them is without owning a house or apartment, something that was unthinkable of just a few years ago. How could you make money with real estate without directly participating in it?
Well, you can take an indirect part in it. There are many companies, like Fundrise, that allow accredited and non-accredited investors to benefit from real estate investments. They usually do this through crowdfunding, where many investors pitch in with some money, which the company manages professionally and uses to invest in real estate. Some companies own the buildings they invest in, and others don't.
This option is accessible to many people, as it isn't too expensive. The nature of real estate makes it easy to gain steady returns, so there's a lower risk. You should research different real estate investment platforms before deciding to put your money in one; check each of their terms and conditions and find the one that suits you the best!
How to deal with real estate during the pandemic
Finding a home or selling your house has never been more complex. On top of all the things that you would normally deal with, you also have to deal with a pandemic that has almost every party involved stuck at home. And that is only one side of it.
Let’s not forget that everyone is also wondering if it is a good time to make a move, as people are worried about their jobs and unemployment rates are skyrocketing.
However, if it is the right time for you, you still can do transactions —as long as you are creative, cautious and have the right high-tech assistance.
If you are a buyer…
In spite of the global pandemic, you don’t need to put your dream of becoming a homeowner on hold. Quite on the contrary, this is an excellent time to find low prices and great deals you wouldn’t be able to find in any other situation. Take this time to learn about different mortgage providers and check their rates, which at an average of 3.23%, is at its lowest in the past 30 years.
It is important to also learn how to take good care of yourself and others. Learn about safety protocols: have hand sanitizer and disinfectants, wear a face mask and mind your social distancing while signing.
If you are taking a home tour, make sure to keep your safety in mind. Avoid shaking hands, stay at least 6 feet apart and wash your hands thoroughly after every single visit.
Experts recommend you avoid being present during the inspection, as the risk of coronavirus increases. When you get the report, carefully scrutinize all the photos and videos you get. Also, it is really important to sanitize everything!
Real estate investment platforms
The main key to investing in real estate is finding really good deals, and this is the tricky part: sometimes it can be a bit hard to get to know these deals for you to invest wisely. Fortunately, there are many options for you to explore:
Based on the premise that individual investors can keep the capital flowing, Groundfloor offers high-yield, short-term real estate debt investment to the general public. According to their website, this way they manage to generate 10%+ returns for their investors while securing your capital with real assets.
A rather new crowdfunding platform, DiversyFund is a company that actually owns the properties they are investing in. This way and unlike the other platforms, this eliminates transaction fees, which in turn translates to higher returns for the investors.
While other platforms focus on individual loans, Roofstock allows you to invest in single-family homes, so this way you don’t have to manage the property directly. Instead, they have their own team to do that. Here you just need to select your search criteria, find a match and make a free offer. If your offer is selected, they’ll charge a marketplace fee of 0.5% of the contract price or $500, whichever is highest.
There are many other crowdfunding investment options, but these are probably the most popular ones and this is a great way to get your capital out there and get excellent returns.
This online marketplace lets you invest in real estate debt. Instead of investing in a property, you can choose high-quality private real estate loans made to borrowers. These go through a careful vetting before being available to investors, which is why you’re less likely to lose money.
The process is simple: your money goes to lenders, who give it out as loans to real estate borrowers. They’ll pay interest on these loans each month, which will then be collected by the company and distributed with all investors.
In only 6 to 24 months you can receive a lot of profit as the borrowers pay back their loans. Even though you need to be an accredited investor and make a minimum investment of $1,000 to participate, this company opens the door to these loans that aren’t easy to reach if you aren’t a traditional real estate investor. Keep in mind that there are 0.25%-1.00% fees!
Whether you’re an accredited or unaccredited investor, as long as you have $1,000 you can invest in a diversified portfolio of private real estate assets. This online real estate investing company wishes to extend the participation on property investment to everyone.
Some of the reasons why Streitwise recommends investing in real estate include the steady and growing dividends that this source provides to its investors. It also includes passive income and high, diversified returns.
This company invests in emerging markets, which are usually fairly priced and give higher dividends to investors. The properties they choose to invest in are ones that are expected to be easily filled with tenants, which means your money will be put in a safe investment.
Additionally, the only fees you need to worry about being taken out before your dividend distribution. They’re also lower than the usual ones: an upfront 3% fee and an ongoing 2% management fee.