A Guide To Investing in Residential Real Estate
Investing in residential real estate is one of the best ways for an investor without a lot of extra cash to begin investing. Residential properties vary greatly, as does the amount and form of investment. REITs, rentals, flipping, and online platforms are the most common forms of investing in residential real estate.
A real estate investment trust (REIT) allows an investor to invest in property without actually owning it. Typically, a company will own REIT properties, and they can offer a decent return on investment when you invest in them wisely. For example, a company may own several apartment buildings; then, investors can purchase stock in those buildings and receive a portion of the profits. The owner can benefit by using their profits to continue to invest in more properties and improve the ones they already own. Much like the stock market, purchasing publicly traded REITs through a brokerage firm is the safest way to go.
House flipping isn’t just for HGTV. Flipping is a popular form of investing in residential real estate and can be lucrative under the right circumstances. House flipping involves purchasing a property that needs work, flipping (improving) it, and reselling it for a profit. Flipping works best when the investor does a lot of work themselves to save money or creates a team that works together and shares the profit.
Online real estate investment platforms connect investors with real estate developers. They are riskier than other forms of real estate investment, requiring a larger sum of money upfront and often a required income tier. Investors contribute in the hopes of receiving quarterly or monthly payouts from their investment.
Another form of residential real estate investment is rental properties. In this case, investors purchase a property for the purpose of renting it out. Doing this allows the owner to pay the mortgage with the rent until they pay it off, at which point all rent goes toward maintenance and profits. Many investors pay off one property, then purchase another, and so on. Owning rental properties can be lucrative if you don’t mind the hassle of maintenance issues and dealing with tenants. The best way to avoid those hassles is to hire a property manager to take care of those issues for you.
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