5 Options To Earn From Real Estate Investments
January 5, 2022 (Investorideas.com Newswire) Real estate can be an excellent way to earn as an investor. Not only do real estate investments have tax benefits, but they also have the potential to produce long-term results. They can also diversify your investment portfolio.
There are various options to earn from real estate investments, from simple investments to fixing and flipping properties. Whether you're interested in investing in a commercial property or a residential property, below are the options you can consider to make money:
1. Invest In Mutual Funds, Exchange-Traded Funds (ETFs), And Real Estate Investment Trust (REITs)
Although mutual funds, ETFs, and REITs belong into a similar category, ETFs and mutual funds invested in real estate can be purchased. It's possible to buy ETFs that invest in real estate stocks like publicly-traded home builders.
There are also ETFs that invest in REITs. Moreover, you may find mutual funds that invest in property management firms and real estate developers. While fund managers can passively manage ETFs, mutual funds can be actively managed.
Mutual funds and ETFs are low costs and offer high liquidity. However, the downside is that there could not be monthly dividends, and you might not get any returns until you sell the shares. The primary benefit of ETFs and mutual funds is that they don't require high investment costs.
On the contrary, REITs allow investing in different real estate assets through a single fund. Consider that as a mutual fund made out of loans secured by real estate or real estate assets. Other investors may pool their resources together into REITs, and the dividends earned are often divided among investors based on the investment's percentage in the fund.
While REITs also enable small investment ticket sizes, they don't often provide yields that could be better than equity-oriented products. In addition, investors have no control over how the investments are spread across every asset in the REIT.
2. Invest In Rental Properties
An obvious way to earn in real estate is to invest in a rental property. You can purchase a home and rent it out to a long-term tenant or buy a small apartment building and a multi-unit rental property.
You may also look into purchasing a property or a vacation rental you intend to rent short-term. Buying a commercial property or any kind of property that isn't residential real estate, such as office building or retail, is another way to generate rental income.
If you're just getting started with real estate investments, it's wise to invest in a single-family home compared to a multi-family home. While a multi-family home is one of the ways to make money, investments in such properties may require experience and a significant amount of capital that you might not have. On the contrary, a family home is easier to maintain, buy, find, and manage.
In addition, single-family properties have a high chance of generating better cash flow and appreciate quicker than some property types. Tenants of such rental properties may also stay for a long time, take good care of the properties, and treat them as their own house. However, you have to remember that you should do due diligence to look for a profitable rental property in a good location.
3. Try Real Estate Crowdfunding
Real estate crowdfunding is another form of real estate investment that will let you earn money. For instance, crowdfunding deals could aim to buy a hotel, spend some years renovating the rooms, and sell it for profit.
At present, there are reliable crowdfunding marketplaces across the globe. Unfortunately, most of the best deals are only limited to accredited investors.
4. Buy Turnkey Properties
There are instances that investors want to sell investment properties prematurely. Whether they had a financial emergency, can't manage the property, or want their money for something else, they can sell the property with tenants in it. These are referred to as turnkey properties.
When you purchase turnkey properties, you buy a house that will make cash right away. You'll also save time since you don't need to look for tenants. Moreover, you can enjoy savings because you don't need to worry about carrying costs, which cover the cost of owning the house without tenants.
5. Fix-And-Flip Properties
If you have money to spare, you may invest in a residential or commercial property that requires more maintenance, fix it properly and sell the asset at a better price to property or asset management companies. The asset's ownership is for a shorter term. However, if one has done their job in the market beforehand, this fix and flip strategy may generate good returns.
Unlike owning properties, flipping properties has lesser constraints regarding registration work and regular maintenance. But, it's essential to be familiar with the supply and demand of the real estate market and the renovation project's work that you're going to attempt.
Those are just some of the many options to earn from real estate investments. From an investment perspective, the choices may range from liquid and passive options, like flipping houses and purchasing ETFs that invest in REITs. An excellent way to make money depends on some things, such as liquidity requirements, knowledge and skill levels, risk tolerance, and the amount of time you like to spend.
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