A Beginner's Guide to the 5 Easiest Ways to Become a Real Estate Investor
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Entrepreneurs tend to have a natural flair for seeking out opportunities, taking calculated risks, and putting their money to work for them.
As budding entrepreneurs, the real estate market affords us an excellent opportunity to flex our entrepreneurial muscles. For one, real estate caters to the basic human need for shelter – inasmuch as the human population continues to increase, there’ll always be a real estate market.
Unfortunately, many people don’t know how or where to get started as a real estate investor. This piece provides insight to five of the easiest ways to participate in the real estate market in the order to complexity and hands-on involvement that it requires.
Investing in a REIT
REITs – Real Estate Investment Trust provides the simplest route to becoming a real estate investor if you don’t want to deal with hassles of buying, maintaining, or renting properties.
REITs are paper assets such as stocks and bonds; in fact, REITs are like shares in companies that invests in, develop, and finance real estate properties. REITs provide a great way to get started on real estate if you want to take advantage of the opportunities in the real estate market without actively dealing with real estate properties.
Real Estate Crowdfunding
Real estate crowdfunding provides a good starting point If you are just starting out in your entrepreneurship journey and you don’t have deep pockets to make a down payment on a property.
Related: How To Tap Into Crowdfunding
Crowdfunding platforms for real estate investments allow you to pool funds with other like-minded investors to purchase a property. The property will be managed professionally, and you and other investors will get returns on your investment as appropriate.
Real estate investment crowdfunding is also a passive way to invest in real estate if you don’t want the hassles of becoming a landlord.
Matchmaking is a relatively new but interesting way to participate in the real estate investment market. Matchmaking involves looking for distressed properties for sale from motivated sellers and then matching up those properties with people experience in fixing and flipping real estate assets.
You get to make some money of the sale without needing to take the title of the property or get involved in the refurbishing, rental, or maintenance of the property. Matchmaking is also a great way to learn the ropes of fixing and flipping until you understand the market enough to risk your own money.
Fixing and Flipping
Fixing and flipping real estate provides a thrilling and more exciting experience in real estate investments. Fixing and flipping typically involves looking for a distressed property, refurbishing it, and selling it quickly to make a profit.
Before you buy a property to fix and flip, you should take the time to understand owe much you’ll spend to close to the purchase, how much you’ll spend on refurbishing it, and the potential resale value.
You’ll also need to include other ancillary costs such as taxes, insurance, utilities, and interest if you are taking a loan to fund the investment. However, if you get all the variables to line up, fixing and flipping tend to deliver the highest ROI in the shortest possible time.
Buy Rental Properties
If you want to take a more active role in real estate investments; then, buying rental properties might be a good starting point. Getting involved in rental property often what comes to mind when most people think about investing in real estate and it requires a more hands-on involvement.
You’ll need to become adept at picking properties in the right price in the perfect locations where there higher-than-average rental rates. You’ll also need to know how to identify good tenants, maintain working relationship with contractors, and navigate the complexities of the finances such as mortgage and taxes.
Here’s why entrepreneurs should have real estate investments
The most popular benefit of investing in real estate is the rental income that it delivers. Rental income tends to outperform the dividend rate of other traditional assets such as the S&P 500 and the bonds.
Secondly, the value of real estate assets tends to increase over he long term at about the same rate as inflation. However, you have more control in proactively triggering an appreciation in the value of real estate assets by remodeling, increasing its curb appeal, or changing its zoning.
Another good thing about real estate investments is the debt leverage that it provides within a sane regulatory environment.
You can leverage $100 000 to buy 5 properties with a $20 000 down payment on each one and then the rental income from the properties can be applied towards paying down the mortgages. The best part is that your equity in a property increases with time as you pay off the mortgage.