Getting started in real estate investment seems intimidating, considering the vast amounts of money needed to purchase properties. Sure, there is a barrier to entry in traditional real estate investment, but there are plenty of beginner-friendly real estate investments you can try out before deciding if it’s worth sinking your teeth into.
Still wondering how you can venture into real estate investing? Here are solid tips to get you started on your real estate investment journey.
1. Online real estate investing platforms
Real estate crowdfunding platforms are websites that connect investors with developers. On these platforms, property developers advertise deals and projects they require funding for, and investors can provide funding that can either be debt or is exchanged for equity.
It’s a win-win situation for everyone since entrepreneurs get the returns on their investments without the hassles of ownership or maintenance. At the same time, the project developers secure the necessary funding.
Investors can choose a single project or a diverse portfolio and get monthly or quarterly dividends. The downsides are some project might have lockup periods where you can’t sell or redeem shares in that investment.
2. Real estate investment trusts (REITs)
Real estate investment trusts (REITs) are a great place to start for novice entrepreneurs. Investors buy shares in REITs in return for receiving consistent dividend payments. REITs are legally required to pay shareholders 90% of their taxable income.
They allow beginners to benefit from real estate even with limited industry knowledge and without buying physical assets. REITs are also an excellent option for those who don’t have the time or resources to devote to real estate management.
You can start by looking into publicly-traded REITs and assessing their performance. The most popular is an equity REIT, which is a company owning income-producing real estate. The average dividend yield for publicly traded equity REITs is about 4.3%.
3. United States Property Coin (USPC)
United States Property Coin (USPC) is a novel cryptocurrency venture backed by real estate. USPC tokens are backed by Primior, a major real estate development corporation that has overseen more than $1 billion in successful projects.
Unlike volatile utility tokens, “stablecoins” algorithmic-backed coins, or those backed by fiat currencies, USPC is backed by the relatively stable real estate industry.
Investors in the USPC token will gain fractional ownership in a diverse portfolio of commercial real estate assets in the US.
As great as the performance of index funds, REITs, and other investment vehicles in battling inflation and building wealth, USPC provides a comparatively much more liquid and transferable alternative. It securitizes income-producing properties in major US urban markets through blockchain solutions compliant with securities laws.
4. Buying rental properties
According to census data, individual investors own over 70% of rental properties, a tried-and-tested investment vehicle for the masses.
If being a managing landlord is not your cup of tea, you could always employ a property management company to handle the day-to-day operations so that you can collect rent as a passive revenue stream. While it will reduce your profits, it will also minimize the amount of hassle and time you have to put up managing a property.
House hacking is also an option at this stage. Traditionally, it meant purchasing a multifamily unit, living in one unit, then leasing out the rest. Investors can use rental income to pay for the property’s mortgage, upkeep, and repairs.
5. Real estate investment groups (REIGs)
This might be the ideal choice if you have deep pockets but lack real estate investing know-how. Like mutual funds, the company will develop vast real estate properties and then allow investors to purchase them through the company.
The company will then manage the property and forward the rental income to investors, less their cut for managing and maintaining the units.
6. Real Estate Limited partnerships
It is similar to REIGS, where you form a group to purchase and manage property for a defined number of years.
In short, you will employ an experienced property manager as the general partner, then seek other investors to fund the purchase. Investors then become limited partners, and they will earn little revenue from rental income.
But the goal is to sell the property soon, preferably at a profit. That’s the point where investors will likely get their money’s worth. The partnership will stand dissolved on completion of the sale.
When starting in the world of real estate investing, it is a good idea to get your feet wet with beginner-friendly investments such as REITs, crowdfunding platforms, real estate-backed cryptocurrency, and purchasing rental properties.
These will help you debunk the myths about real estate investing and equip you with the relevant knowledge to take on more sizable real estate developments.