4 Simple Ways to Invest in Real Estate

1. Become a Landlord

Ideal for: People with DIY and renovation skills, who have the patience to manage tenants.

What it takes to get started: Substantial capital needed to finance up-front maintenance costs and cover vacant months.

Pros: Rental properties can provide regular income while maximizing available capital through leverage. Moreover, many associated expenses are tax-deductible, and any losses can offset gains in other investments. 1In ideal situations, properties appreciate over the course of their mortgages, leaving landlords with a more valuable asset than they started with.

Cons: Unless you hire a property management company, rental properties tend to be plagued with constant headaches. In worst-case scenarios, rowdy tenants can damage property. Furthermore, in certain rental market climates, a landlord must either endure vacancies or charge less rent in order to cover expenses until things turn around. On the flip side, once the mortgage has been paid off completely, the majority of the rent becomes all profit.

2. Real Estate Investment Groups

Ideal for: People who want to own rental real estate without the hassles of running it.

What it takes to get started: A capital cushion and access to financing.

Pros: This is a much more hands-off approach to real estate that still provides income and appreciation. 

Cons: There is a vacancy risk with REIGs whether it's spread across the group, or whether it's owner specific. While these groups are theoretically safe ways to invest in real estate, they are vulnerable to the same fees that haunt the mutual fund industry. What's more, these groups are sometimes private investments in which unscrupulous management teams bilk investors out of their money. Fastidious due diligence is therefore critical to sourcing the best opportunities.

3. House Flipping

Ideal for: People with significant experience in real estate valuation and marketing, and renovation expertise.

What it takes to get started: Capital and the ability to do or oversee repairs as needed.

Pros: Flipping has a shorter time period during which capital and effort are tied up in a property. But depending on market conditions, there can be significant returns, even in shorter time frames.

Cons: Real estate trading requires a deeper market knowledge paired with luck. Hot markets can cool unexpectedly, leaving short-term traders with losses or long-term headaches.

4. Real Estate Investment Trusts

Ideal for: Investors who want portfolio exposure to real estate without a traditional real estate transaction.

What it takes to get started: Investment capital.

Pros: These are essentially dividend-paying stocks whose core holdings comprise commercial real estate properties with long-term, cash-producing leases.4

Cons: They are essentially stocks, so the leverage associated with traditional rental real estate does not apply.

As a Professional Realtor, I will be with you in every step of the way to guide you and make the transaction as smooth as possible.