5 Real Estate Opportunities for Entrepreneurs in 2020
Even new entrants can profit from one of the economy's most dynamic and profitable sectors.
Real estate has always been one of the most attractive investment offerings. Its relative stability makes it a good option for capital appreciation, and when done well, it can generate exponential profits. In 2019, the housing market made significant gains, driven largely by a reduction in supply and very low mortgage rates. Experts predict that the trend is likely to continue, meaning that for entrepreneurs and investors looking to turn serious profits, real estate is definitely the place to be looking at. Here are five ways to enter the market quickly and profitably.
1. Real Estate Mutual Funds
You can choose mutual funds that invest generally or select one that’s focused on a specific type of investment. Real estate mutual funds restrict their activity to property trading and other related businesses, which means that they will benefit from the trend of profitability in the sector.
When you’re making a decision as to which fund to put your money into, consider its track record and methodology. Just because two funds style themselves as real estate mutual funds does not mean that they have the same investment rules. Find one that has consistently made a profit and whose investment styles you’re confident in. Mind the fees too – lower is better, but be sure you’re not sacrificing quality.
2. Real Estate Investment Trusts
These are similar to real estate mutual funds, with the primary difference being the degree of control an individual investor has. If you’re a hands-on investor, you should consider REITs. They have shares you can buy as many or as few of as you like, based on your forecast of their performance.
Mutual funds invest in REITs as part of their overall portfolios, but the decisions regarding which investments to make will be left in the hands of fund managers. Stick to publicly traded REITs; the private ones might promise better returns, but there’s much less oversight and thus more risk.
3. Short-Term Rentals
You knew this was coming, right? Rental property has always been one of the surefire ways to earn money in real estate, as long as you get the fundamentals right. Whether you’re constructing homes or renovating, renting out your property will bring in a steady income that you can re-invest into the business or use for other purposes.
Nowadays, the traditional rental model is still workable, but is taking a backseat compared to short-term rental services like Airbnb. You can often charge a premium, especially if your property is in a vacation destination. “The good thing is that you can hire a property manager to handle all aspects of the process for you,” according to Morgan Akchehirlian, CEO of Co-Host Market. "There is a ton of opportunity in short-term rentals, and I believe that once people see them, they are going to leap at them."
4. Investments in Real-Estate Focused Companies
As they say, sometimes the people who make the most money are not the miners, but the traders selling pickaxes. For instance, many startups are using AI, machine learning and other frontline technologies to provide services to real estate companies, homeowners and other stakeholders -- and making a killing while doing it.
If you have an idea for a company in the real estate sphere, now is a good time to launch it. You can also go the indirect route by investing in a promising company. As always, do your due diligence and ensure that the business model is workable and likely to provide good returns before you put your money, time and effort in.
5. Real Estate Notes
In essence, this is you buying up a debt that’s owed by a homeowner and then collecting on it. Since these are usually sold on distressed properties in which there has been a default in payment, you can likely buy notes for a deeply discounted price. The options are then to either foreclose or work with the homeowner to restructure the payments.
Investors focused on quick, high profits can take the shorter route and just foreclose (in compliance with the contracts and relevant laws and regulations), but many people also take the longer view and focus on restructuring the debt in a way that’ll be more convenient for the homeowner to discharge. This route might take longer and not yield quite as much profit, but it’s more stable and would also bring the benefit of knowing you’re helping people in need while you make invest and earn.
On the whole, entrepreneurs and investors would do well to look toward real estate in the coming year. The market has been growing, and it doesn’t look ready to stop anytime soon. As always, due diligence is crucial to keeping your capital safe, ensuring you earn profits and keeping yourself clear of dispute and legal issues.
Entrepreneur Leadership Network Contributor