6 Ways to Invest in Real Estate
One of the best things about real estate is that there are many different ways in which to invest. This makes it an attractive money making opportunity for all budgets and financial goals. As an investor, you can do one, a combination or all of the ways to invest in real estate listed below.
Turnkey rentals are one of the easiest ways to invest in real estate. It’s also a highly passive way to earn income through property ownership. Turnkey rentals are defined as rental property that is sold to the investor “turnkey.” That is, the property is all set up to start making money for the investor from day one. The best turnkey rentals are nicely rehabbed. A new owner shouldn’t have to start making repairs to the property right away. There is usually a rent-paying tenant in place, and there’s often a property manager already in place as well. Optimally, the investor wants a cash flowing turnkey rental, which means that there’s profit even after all the monthly expenses have been paid, including the mortgage and the property manager fees.
Fractional Ownership Vacation Rentals
Another very popular way to invest in real estate is through fractional ownership vacation rentals. This is popular because the investor not only gets the monetary benefit of the cash flow; they can also personally use the vacation property a couple weeks every year. Fractional ownership is especially affordable because the cost of maintenance is shared by the joint owners of the property. Through the fractional ownership model, an investor who might not be able to afford even a cheap vacation rental property alone might be able to buy into a premium level property in a top vacation spot. The best vacation rental properties are located in areas that are affordable tourist attractions, such as Belize.
Private Money Lending
Private money lending is a way to enjoy very high returns with very little risk. The downside is that it’s typically only available to accredited investors. For those who are accredited, however, private money lending is extremely popular. It’s one of the most passive ways to invest in real estate that exists. With private money lending, an investor makes funds available for a project. The borrower might be a commercial or residential developer or it could even be an individual. The investor receives a certain amount of dividends each month and gets their capital returned in a relatively short term; often 12 or 16 months. Private money loans usually have steep minimums, which is another reason why they are generally only accessible by select investors.
REIT stands for Real Estate Investment Trust. These trusts are typically held by corporations that invest in real estate properties. When you invest in real estate through a REIT, you are basically buying real estate stock. Many REITs are publicly traded. The investor then gets a return of interest on their investment for as long as they’re invested in the REIT. The percentage of return on REITs varies depending on the stock and where the investor puts their money. This is a very simple way to invest in real estate with very little money. The investor doesn’t need to be accredited, and they can liquidate their investment at any time; there are no set terms.
Public or Private Real Estate Investment Groups
Anyone can start a real estate investment group. If an investor has friends or family members interested in investing in real estate, they can make the union official by forming a legal entity. In this scenario, someone in the group would be in charge of finding real estate deals to invest in. The group then shares in the expenses and the profits from the investment. The terms of a private real estate investment group are flexible; they can be anything that the group decides upon. A public real estate investment group operates in a similar fashion, except that anyone is welcome to pool their money with others, and the person making the real estate investment decisions is most like a board or group of select members.
One of the ways to invest in real estate that’s become more popular recently is house flipping. This has been made more popular due to the variety of reality TV shows dedicated to the topic. House flipping is when an investor finds a distressed property or an undervalued property, rehabs it and then sells it for a profit. This kind of way to invest in real estate is very labor intensive. Even if the investor isn’t doing the manual work themselves, they need to oversee it in order to protect their investment. House flipping also carries a huge amount of risk, especially for an investor who isn’t savvy about construction and rehab work.
Here at American Real Estate Investments, we offer lots of ways to get started in real estate investing. You could become a private money lender, own a fractional share in a vacation rental property or invest in a turnkey rental for passive income. A supportive team at American Real Estate Investments is already in place, ready to help you succeed for yourself, your family and your legacy. Contact us any time for more information.