If you want to retire early, investments in real estate are an easy and attractive option. Real estate investing can be lucrative. Besides being an additional income stream, it can help diversify your existing investment portfolio. However, awareness about how to go about investments in real estate is very poor.
Here are some of the best ways to make money in real estate, ranging from low maintenance to high.
Buy Real Estate Investment Trusts
This is considered to be a safe investment route as REITs allow one to invest in real estate without physical holding of real estate. Often compared to Mutual Funds, they’re companies that own commercial real estate such as office buildings, retail spaces, apartments and hotels. REITs tend to pay high dividends, which makes them a common investment in retirement. Investors, who don’t need or want the regular income, can automatically reinvest those dividends to grow their investment further.
REITs are considered to be a safe investment route as they allow one to invest in real estate without physical holding of real estate. Often compared to Mutual Funds, they’re companies that own commercial real estate such as office buildings, retail spaces, apartments and hotels
Understanding Complexities of Investment
However, investment in REITs can be complex. Some trade on an exchange like a stock; others aren’t publicly traded. The type of REIT you purchase can be a big factor in the amount of risk you’re taking on, as non-traded REITs aren’t easily sold and might be hard to value. New investors should generally stick to publicly traded REITs, which you can purchase through brokerage firms.
There are platforms which connect real estate developers to investors who want to finance projects, either through debt or equity. Investors hope to receive monthly or quarterly distributions in exchange for taking on a significant amount of risk and paying a fee to the platform
For that, you’ll need a brokerage account. If you don’t already have one, opening one takes less than 15 minutes and many companies require no initial investment. One can also gain exposure to a more diversified selection of real estate investments by buying into a fund that has interests in many REITs. You could do this through an ETF or by investing in a mutual fund that holds shares of multiple REITs.
There are platforms which connect real estate developers to investors who want to finance projects, either through debt or equity. Investors hope to receive monthly or quarterly distributions in exchange for taking on a significant amount of risk and paying a fee to the platform. Like many real estate investments, these are speculative and illiquid — you can’t easily unload them the way you can trade a stock. There is a saying that you can make money only if you have money. Many of these platforms are open only to accredited investors, defined by the Securities and Exchange Commission as people who’ve earned income of more than $200,000 ($300,000 with a spouse) in each of the last two years or have a net worth of $1 million or more, not including a primary residence. Alternatives for those who can’t meet that requirement include Fundrise and Realty Mogul.
