Investing In Real Estate
The final avenue to invest in real estate that well be going over is investing in one of the many businesses working in and around the real estate sector. While this could include those engaged in constructing and flipping houses as well as owning and operating properties, there are also options to get into a real estate adjacent support sector.
AI and big tech are really everywhere at this point. Real estate is no exception. Companies have sprung up with software that helps bring the latest data insights to property valuation. For example, you could get in on the ground floor of the next great app to help manage landlord-tenant relationship. It doesnt really matter what it is. The point to take out of this is that real estate doesnt just have to mean building houses and apartments.
You should consider this option if you have an idea for a service to serve the real estate industry or know of one you can get involved in backing along with no shortage of confidence in the business plan and the housing market.
This confidence in your investment is important. While direct investment in a business can lead to higher returns than other investment options like REITs, it also typically comes with a higher upfront investment and the additional risk. If the venture you invest in goes belly up, you may not get the investment back. This isnt the investment option for the faint of heart.
Is Real Estate Crowdfunding Risky
Compared to other forms of real estate investing, crowdfunding can be somewhat riskier. This is often because crowdfunding for real estate is relatively new. Moreover, some of the projects available may appear on crowdfunding sites because they were unable to source financing from more traditional means. Finally, many real estate crowdfunding platforms require investors’ money to be locked up for a period of several years, making it somewhat illiquid. Still, the top platforms boast annualized returns of between 2% and 20%, according to Investopedia research.
Why Real Capital Analytics
Real Capital Analytics is the go-to universal data and analytics solution for global commercial real estate investing and transactions.
Though it represents one of the largest capital markets asset classes, commercial real estate can be opaque and challenging to monitor. Having recorded over $40 trillion of commercial property transactions linked to over 200,000 investor and lender profiles, our granular data universe bridges the information gap, delivering the transparency you need to develop strategy, evaluate risk and execute deals.
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Become A Money Partner
Many people want to get into real estate investing, but they dont have the cash to do it by themselves. Even if a bank loans you 80%, coming up with the other 20% plus any budgeted renovations can easily set you back $20,000 $50,000.
Similar to hard money lending, becoming a money partner means you are bringing the cash to the table, and the other party is bringing the deal . But instead of offering them a loan at a set interest rate, you are becoming an equity partner with them and will make a certain percentage of the total profit at the end of the day.
For example, maybe a flipper is getting a hard money loan to cover 70% of his total costs of purchase and renovation but still needs the other 30%. Thats where you come in. In exchange for providing the remaining 30% of funds, you will get a certain percentage of the profits when the house is renovated and sold .
The structure of these types of partnerships can be with almost any terms imaginable. In my experience, they work best with someone you already know and trust.
But even still, the terms of the partnership should be written down and agreed to beforehand, and preferably reviewed by an attorney. Many things can go wrong in a deal, and you want to make sure your hard-earned money is protected as best as it can be.
The Life Bridge Capital Team Is Excited To Present Fund 1 An Opportunity To Invest In A Diversified Group Set Of Assets In The Multifamily Space
The two core assets types will be:
- Traditional value-add deals across the Rockies, with a special emphasis on Boise, Salt Lake City, and Colorado Springs. These deals will drive consistent cash flow and a high degree of predictability.
- Development deals in the Boise, Idaho Metropolitan Statistical Area. This MSA is in the top 5 of almost any growth measure, population, job growth, single family home values, and rental rates. Existing product is extremely difficult to come by, but land is still relatively affordable. This creates an exciting opportunity to pursue building Class A assets and take advantage of these economic trends.
Combining these two types of multifamily will lower the overall risk profile, while also driving returns up as the development projects mature. Your funds will be spread across multiple properties, which will diversify your portfolio while still mitigating your risk.
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Invest In Home Construction Companies
Beyond just purchasing REITs, you can also invest directly into home construction companies. This requires more research if youre planning on picking the stocks on your own rather than investing directly into an EFT. But it can often pay off with higher returns if you choose a winning stock.
There are many publicly traded home construction companies you can add to your stock portfolio, or you may decide to look for other construction-related stocks. Common examples include Caterpillar, which makes construction and mining equipment, and Nucor, which manufactures steel.
Investing directly into home construction companies can be a great way to earn consistent dividends from real estate development without owning or managing any property. But you must pay attention to the market and look at the stocks fundamentals to be sure that its a wise investment.
Where To Find Deals
Private loans are most often executed between parties who have an existing relationship. The borrower may be a friend, family member or someone who you already have a business relationship with.
I also encourage you to make connections with others outside of your normal network. A great way to do this is by becoming active in the BiggerPockets forums. While you must sign up for an account, membership is free.
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Invest In Real Estate Without The Hassle
I hope this article inspired many of the armchair real estate investors out there to take action. As you can see, you dont have to be a landlord to make money in real estate.
Whether passively investing through a REIT or crowdfunded syndication, or starting a side hustle catering to the real estate industry to save up investment capital, there are so many different ways to participate in the most significant wealth generator of all time.
This article originally appeared on Wealth of Geeks and has been republished with permission.
Risks Of Investing In Reits
Every form of investment comes with its own set of risks and challenges. Following are the risks of investing in REITs that you should know about:
Liquidity
While REITs are relatively more liquid than other real estate investments, it is still harder to sell a REIT unit than other equity shares. This is because the number of investors for REITs is lower than the number of investors for equity shares.
Tax Implications
Long-term capital gains exceeding 1 lakh on sale of REIT units through a recognized stock exchange will be taxable in your hands at the rate of 10% without indexation and 20% with indexation . In case your taxable income as reduced by the capital gains is below the basic exemption limit, the capital gains will be reduced to the extent of the shortfall and only the balance capital gains will be taxable. REIT units qualify as long-term capital assets if they are held for more than 3 years. Short-term capital gains will be taxable in your hands at the rate of 15%.
Tax on dividend income depends on whether the REIT had obtained special tax concession from the government. If yes, then the dividend is taxable in the hands of the investor. If not, then no tax is applicable.
Limited Investment Options
Since REITs are fairly new in India, they have low acceptance as a preferred asset class. At present, there are only 3 domestic REITs and 1 international REIT in India, making the investment options in REITs limited in nature.
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Real Estate Mutual Funds
Many people are looking for different ways how to make money in real estate without owning a property. As they take the time to search for solutions, some of them discover the wonderful world of real estate mutual funds. It is probably the cheapest and easiest way for investors to get started on real estate investing.
One of the best things about real estate mutual funds is that it offers investors solid inflation protection since property prices arent as volatile as typical stocks. This kind of stability reduces the risks typically associated with ordinary mutual funds plus it gives investors greater return rates.
Be A Resident And The Landlord: Buy A Multi
Your primary residence doesnt have to be a single-family home. Multi-family homes can be a great way for novice real estate investors and aspiring property managers to get started buying properties that generate income.
First, with the help of a professional, find a good real estate deal on a 2-4 unit property. These homes are typically known as multi-unit properties. While living in one unit, youll rent out the others. You can then use the rent payments to help offset your mortgage payment.
The key here is that you can buy a multi-unit property using an affordable financing option like an FHA loan or VA loan as long as you live in it, too.
Mortgage programs like FHA loans dont just have good rates and terms. They also give you options for covering the down payment.
You may be able to obtain gift funds, or perhaps even down payment assistance. And you can use these programs to buy the home without emptying your bank account.
If not, thanks to Federal Housing Administrations low down payment loan requirements, borrowers with good credit only need 3.5% of the purchase price for the down payment with either a traditional FHA mortgage or the FHA 203K loan, which is well-suited for fixer uppers.
You may be out-of-pocket with some upfront costs, but it will be less money than 20% down.
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Investing In Real Estate Without Owning Any Property
Nowadays, many TV shows feature people buying or flipping properties, renovating their homes for profit among countless other real estate opportunities. Watching the subjects of these shows transform into wealthy people can be very convincing however, if youre strapped for capital and time, then it may seem like an opportunity out of reach for you.
You may have considered getting involved one way or another as the allure of passive income seemed like a simple process worth exploring. Following some initial research, this investment vehicle became more and more intimidating with the capital requirements exceeding your investment budget and the complexities of the vast array of investment options becoming overwhelming.
Recent news circling the booming trend of commercial real estate in Canada sheds a spotlight on larger profits derived from commercial real estate however, owning and managing this property asset can be stressful and time-consuming.
If you are a landlord, you have a long checklist to complete from paperwork, tenant screening, monthly rent collection, and maintenance to name a few. Dealing with such tasks can not only drain your enthusiasm for a higher income but may also come with greater risk exposure. Although owning property can bring you a great deal of money, there are other worthy alternatives to generating income without owning any property.
Stabilize And Optimize The Properties That You Already Own
If you’re not interested in acquiring more properties or can’t find a deal that makes sense for you, there are other ways to bolster your real-estate investing business in 2023.
After all, buying property is just one phase of investing in real estate. According to Bull, there are three phases required to build a successful real-estate business: acquisition, stabilization, and optimization.
Succeeding in real estate doesn’t just mean owning a ton of properties. After you actually buy an investment property, you have to stabilize it, which involves things like renovating and leasing it. This phase is all about getting your property into a position where it’s actually performing and cash-flowing.
Are there home improvement projects you can do that will boost the value of your property? Updated flooring and paint jobs, for example, are relatively simple ways to transform a space, she noted.
The final phase, optimization, is ongoing. This is the phase in which you develop systems and processes to make your business more efficient.
Optimizing your properties will look different depending on the size of your portfolio and what your goals are. Bull is planning to spend a lot of time in this phase in 2023. One of her main goals is to try to secure tenants who want to stay put for a long time.
Spend time building up your contact list of “key players,” like plumbers, electricians, and handymen.
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Find An Investment Opportunity
For first-time syndication investors, finding an open, appealing project is usually the most challenging piece of the process, but several options exist. Here are some for you to consider as you start your journey.
Many real estate investors rely on networking and personal connections to find deals. Meeting those in the industry who live in the same area as you is a good starting point. The introverts among us will rejoice that meaningful real estate networking can also happen online through online, investment-focused forums like Bigger Pockets. But those forums can connect you with local real estate groups in your areawhere you may find in-person meetups.
Next, reaching out to syndicators is never amiss. Even if there are no open deals, syndications almost always have investor lists which potential investors can join to be notified of upcoming projects.
While the timing sometimes works out perfectly, new syndication investors should be prepared to be patient to find the right deal at the right time rather than rushing into something that isnt a good fit just because its available. Ultimately, syndications require large, long-term commitment of your money, so be sure to choose one that instills confidence.
Look For Seller Financing
Another way to acquire property with no money down is with help from the seller. Known as owner financing” or seller financing, this type of loan is an agreement where the seller handles the mortgage process instead of a financial institution. The borrower repays the loan as specified in its repayment terms that are detailed in the formal agreement.
This works especially well with sellers who have no mortgage. For example, this can happen when someone inherits a property and does not want to keep it.
For sellers that are willing to take on the role of financier, owner financing can help sellers move a home faster with sizable returns on their investment.
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Be The Bank And Get The Return
There are quite a few ways to invest in real estate without owning a property, and one that I always recommend when someone asks me is to be a money lender, said Nicky Taveras, owner of DNT Home Buyers. Getting loans is not the easiest or most convenient for a lot of people because it has to do with income, and credit. However, if you have a lot of cash, and know a few real estate agents you really trust, you can be their hard money lender.
Depending on where you live, you dont even need to be an agent to invest in real estate, so if you know a few people who have been wanting to get into the industry without dealing with buyers, sellers or even being a landlord, being the bank might be a good option. The goal is to lend money for a transaction that is short term. This isnt for the traditional purchase of a home for someone to live in, but for a home that is going to be flipped, then sold after that.
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Why Should I Add Real Estate To My Portfolio
Real estate is a distinct asset class that many experts agree should be a part of a well-diversified portfolio. This is because real estate does not usually closely correlate with stocks, bonds, or commodities. Real estate investments can also produce income from rents or mortgage payments in addition to the potential for capital gains.
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Ways To Invest In Real Estate
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Real estate is a desirable investment thats a vital part of the portfolio of many millionaires.
One of the great things about real estate is that there are many different ways to invest. However, if youre new to investing in real estate, understanding your options and knowing which one is right for you can be challenging.
This article will look at 11 different ways to invest in real estate. First, well cover how to invest without buying and owning property. And after that, well look at the options that do involve buying or owning property.
Hopefully, with the help of the information presented in this article, youll be able to identify opportunities that would be a good fit for your situation and start to move forward.
The best aspect of investing in real estate is the addition of incoming-generating assets to your portfolio that will produce passive income. That passive income can be an excellent supplement or help to provide for you and your family during retirement, allowing you to live off dividends.
