Table of Contents
{1}. Higher Ground
{2}. Crouch, Walk, Plunge
{3}. Who’s the Boss Now?
{4}. So You Want to Be a Landlord
{5}. The “Buy and Hold” Strategy
{6}. Rent “To Own”
{7}. Fixer Upper
{8}. Do You Remember the “Rule of 40”
{9}. The “Pockets” Strategy
{10}. Fix and Flip
{11}. The “Active Investor” Strategy
{12}. flipping formula
Invest in Fundrise
Fundrise is a crowdfunding platform that invests in real estate investments. It allows you to create a diversified portfolio of real estate investments from all over the country, the world even.
The best part about Fundrise is how you can customize your investment. You can choose how much you want to invest and where you want to invest your money. They have a bunch of real estate investments in their "portfolio of opportunities" based in every market across the country. When you invest in Fundrise, you have the option of choosing what market you invest your money in. If you want to invest in real estate in San Francisco, you can do that. If you want to invest in Dallas, Austin, Seattle, or any other major market, you can do that, too.
Their team of analysts and researchers look at all opportunities to find the best investments for Fundrise’s investors.
They also use their own capital, as well as the capital of their investors to help these businesses succeed. So, Fundrise is a crowdfunding platform that not only helps you invest in real estate, but also takes a vested interest in your success.
If you want to learn more about Fundrise, you can check out their website or download their free app.
Owning Your Own Home: Wait, What?
As many others, you might have dreamed of owning your very own home. Or you might have thought that it’s just a luxury that you can’t afford. But you aren’t an aspiring investor, are you?!
To your surprise, there are plenty of ways to achieve ownership of your own property.
If you are ready to take it a step further, you might even think about being your own landlord. Even in that case, there are tons of options available to you.
Real estate is a tricky market that can be heated and complex. To make things easier for you, this magic guide explains 12 different investment strategies for real estate.
Buy Rental Properties to Generate Income
If you purchases a single family home and rent it out, that property is considered a rental property and you are a landlord.
Let’s say you buy a duplex, or even 19 of them and you rent them out, you are now a landlord. Buying properties to rent out is becoming one of the most popular methods for investors to generate revenue.
There are many benefits to this type of income generation. First and foremost, investors can experience significant tax advantages through depreciation (on their real estate investment) and to a certain degree, through the use of a limited liability company (LLC), which is one way to get even more tax benefits.
Another reason people choose this strategy is because they want to invest in multiple markets.
An investor can purchase a duplex in the northern part of town and a triplex in the south or vice versa. This also gives them the opportunity to provide discounted rent for the tenants in the north or south part of town.
This is a great way to generate stronger profits to offset any losses that may come with other investments.
Invest in Real Estate through Online P2P Platforms
Classifieds or the local newspaper used to be the primary business networking tools available to us. Today, just a few clicks, it's enough to search and find whatever you need. For real estate investors and traditional investors, online platforms provide a better chance to find great investment properties.
Just like any other industry, there are 2 sides of the financial real estate:
- Buy property directly from owners
- Lend to owners
Investing in Commercial Real Estate
Commercial real estate is defined as the ownership of real property for use as storage, work space, or other business purposes. Investing in commercial real estate can be a tricky, but rewarding, business.
When investing in commercial real estate, you’ll need to find a motivated seller, and in many cases, the seller will likely be a bank or financial institution. The first thing you’ll need to do is decide exactly what type of property you’re looking to buy. Is it residential or commercial? Do you want a piece of mining lands or oceanfront property? What kind of terms is the seller looking for?
Once you’ve decided what you’re looking for, you’ll need to get quotes from various companies offering commercial real estate financing services. You may need to make some upgrades to your property to attract tenants, which can prove to be quite costly. It’s important to figure out the cost of these upgrades before signing on the dotted line.
Once you’ve made your purchase and the deal is done, you will have complete control over your property. This means you can do whatever you want with it.
As Seen on TV: Fix-and-Flip
Flips!
One of the easiest ways to invest in real estate is to flip a house. Flip houses involve buying a distressed property then fixing and renovating the house to get it back up to market value. These Houses that have around a 25-30% markup, can make for great returns on an investment.
But some houses, and their communities, are better for flipping than others – and this comes down to the following 3 factors:
Community – Is the neighborhood a strong one with long-term residents? Are there areas of the neighborhood that are deteriorating? This is where quick cash is usually made or lost. Do you have help from neighbors?
Property – Does the property have a sturdy foundation? Other issues could be anything from foundation issues to the houses original floor plan (which may not work for you) or it’s location (it wasn’t thought of as prime real estate before and may not be now).
Profit Margin, Financial Factor, and Estimated Cash Flow: Your profit is only as strong as your profit margin, your estimated cash flow, and the financial factors involved. All 3 of these determine whether you can get what you need out of the deal. Remember, you are in business to make money, not just to flip a house.
My Own Failed Attempt at Becoming a Real Estate Entrepreneur
The Real Estate market has always interested me. Not as an investor per se, but more because I have always been intrigued with how money flows, how buildings are constructed and how it all connected to a bigger picture. I could list out a bunch of personal reasons why I wanted to invest in Real Estate, but I’ll spare you those.
What I want to talk about is my own personal experience in trying to become an investor in the real estate market. It all started when my partner (I will call him Jake) and I decided to start our very own Real Estate company. We came up with a game plan to purchase foreclosed homes (rescue, fix and resell them) and to quickly find a way to establish a cash flow to fuel our business. To fight the competition we were going to buy the foreclosed investment homes cheap and sell them high.
The first step was to secure a much larger down payment than normal, or what I would normally consider to be an equally large down payment. After setting up a meeting with my bank to secure my loan I felt the butterflies of excitement and nervousness. I knew that if I achieved my goal I would be able to buy more homes and begin building my own nest egg. If not, I would have to set my dreams aside again and go to work for someone else. I would maybe even have to go back to school for more work.
Rent Out Space in Your Home or on Your Property
If you have extra space in your home or on your property, consider renting it out to someone. I do this with my spare room (when I had one) and it pays pretty well. Just be sure you have it near your residence so that you can make repairs quickly if a leaky faucet or other ugly surprises come up, and to avoid the hassle of the commute. You may also want to have it listed as a separate room for easier renting.
Real Estate Investment Trusts (REITs)
Real Estate Investment Trusts are a form of publicly traded real estate investment that allows investors to purchase shares of a real estate portfolio, similar to how one might purchase shares in a mutual fund.
The best part about REITs is that they allow you to earn a profit based on capital appreciation. You don’t have to deal with renovations or home management. Diversifying your portfolio is as easy as buying different REITs from smaller companies to one of the big boys; or you can spread it across the board. Diversification is very crucial as it spreads the risk of losing your money and allows you to put your money into different real estate projects so you can be safe from a downturn if one occurs.
Depending on the REIT you choose, you may also earn an income based on its regular distribution of dividends. The REITs I invest in generally pay out about 8%-9% in annual dividends, which compounds my original investment through the years. If you’re into dividend investing, there are REITs that pay quarterly dividends that I’m currently in the process of researching.
So, yes, REITs are still a viable investment option. In fact, I’m about to purchase more shares in my existing REITs.
Real Estate Limited Partnerships (LP)
Real Estate ETFs and Mutual Funds
The best way to invest in real estate is to buy actual property, right? Sure, if you have a huge amount of cash on hand and want to put down a substantial down payment.
But if you don’t have a huge amount of cash, or you’re wanting to make a wise investment for your future, a mutual fund or exchange-traded fund that focuses on real estate may be the way to go.
ETFs like Vanguard REIT ETF (VNQ), iShares Core U.S. Aggregate Bond (AGG) and the iShares 20+ Year Treasury Bond (TLT) are way more liquid than the physical properties they invest in.
I’ve begun investing in vanguard REITs and have been impressed. The fact that you’re not locked into any one property and can always sell your stake in a mutual fund, or ETF if it goes down, has been a huge benefit, since the real estate market has been rather volatile the past few years.
Real Estate Investing Through Notes and Tax-lien Certificates (ADVANCED)
Buying and selling individual properties can prove to be costly if you’re a novice in the real estate sector. However, if you know your way around the real estate sector, investing in small real estate properties can prove to be very profitable. There are different types of investments in real estate that can be done by any aspiring real estate investor including major purchases of land or a whole building. Here’s a guide to understanding the different real estate investment types.
Real Estate Notes
What is a real estate note?
A real estate note is a loan that is secured by real estate. The note-holder lends money that is used to buy a single-family home, a piece of land, and so forth. Lenders like real estate notes because they have built-in collateral (the property) and they usually get paid before other debts.
Notes can be good investments to hold onto. When you sell the note, you will usually get back more than your original investment, the payment stream, and, hopefully, a profit.
Tax-lien Certificates
Tax-lien certificates are one of the most popular investments for real estate investors.
When a property owner misses two consecutive tax payments, the county may place a tax-lien on the property. After a specified period of time, the county will auction off the tax-lien to the highest bidder with the stipulation that the winning bidder must pay off the current owner’s tax debt.
Many investors bid on these tax-liens in hopes of obtaining a tax-lien certificate along with the right to collect payment from the property owner. These certificates often have very high interest rates (10% – 20%) and investors can sell them to other investors as they wait for the property owner to pay the back taxes. Taxes are an investment because they grow every year and the longer you hold onto them, the more money you’ll earn.
The downfall: Tax-lien certificates can be tricky and investing in them can be dangerous! Proceed carefully and do your homework.
Final Thoughts on How to Invest in Real Estate Invest
Ing in real estate is a great way to build wealth. It allows you to build passive income streams and serve as a solid investment that fuels your goals and future plans.
I’d like to leave you with some final thoughts to help you remember what we talked about. We covered a lot of different ideas and discussions so you can gain a bigger picture of the topic than what would be possible with the book itself.
Here’s a brief overview of what we’ve discussed today:
- How to Identify Investing Goals, Priorities, and Strategy
- Why Most People Choose and Lose Money When Investing in Real Estate
- Real Estate Investing Quantified
- Never Buy a Deal From a Stranger
- Why a Good Credit Score Significantly Improves Your Chances of Success
- What to Look for in a Realtor (Why Salespeople Aren’t a Good Option)
- How to Buy Property
- Different Types of Property You Can Buy
- How to Find Properties (Is Hunting Worthwhile?)
- How to Evaluate Properties (Red Flags and Ways to Decipher the Good from the Bad)
- How to Judge a Deal that’s Right for You (Deciding the Best Type of Property)
- Why Self-Managing Can Make You Wealthier
About the Author
He’s a college professor, a landlord, an entrepreneur, an investor, a personal trainer … and a recovering workaholic. His favorite class to teach is called “Introduction to Personal Finance” … which he uses as his personal excuse to share the secrets of how to invest in real estate (and other things) on the side, without having to quit your day job.
And the best news of all is that he somehow convinced his wife that he really did want to write a personal finance blog.
You Might Also Enjoy
Almost any investment in real estate may be classified as long-term capital gains. That means you can usually place most types of investments in this broad category.
After you understand the definition of long-term capital gains and the features that distinguish it from short-term capital gains, you probably won’t be able to determine which is which.
So I suggest you don’t worry too much about that definition. Instead, I’ll outline the rules that determine which type of capital gain you’ll pay. It’s usually not worth the effort to agonize over it once you know what to look for; you probably won’t have to change your investment plan.