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Real estate is a reliable way to grow wealth and hedge against inflation. It’s also tangible, unlike stocks and bonds. Investing in real estate can be as hands-on or as hands-off as you want it to be.
Buying a Home
Real estate has always been an attractive investment option. It can diversify an existing portfolio, add income and provide a safe haven from volatile stock markets. But it’s not without its challenges.
For example, house-flipping requires a sharp eye for what can be fixed at a reasonable price and an estimate of what a property can later sell for. Miscalculate, and a profitable deal could turn into a loss. And unlike stocks, real estate investments are relatively illiquid.
For those who want to take a more passive approach, there are real estate crowdfunding platforms like Clever that connect high-net-worth investors with carefully vetted and diversified residential properties. Just connect with a local, full-service Clever Partner Agent to get started!
Buying a Rental Property
Real estate can be a great way to earn rental income. And unlike stocks, real estate prices tend to rise with inflation, protecting investors from price swings and volatile markets.
Many investors start by buying a few small residential properties. This gives them a taste of what it’s like to be a landlord and allows them to learn the ropes without investing too much money.
Larger-scale rental properties typically require a significant amount of cash on hand and are often managed by professional property management companies. For these investors, the investment returns can be more substantial.
If you want to invest in commercial real estate but don’t have the capital, new online business platforms are connecting developers with investors that don’t have to come up with tens of thousands of dollars on their own. However, these sites are only open to accredited investors, which the Securities and Exchange Commission defines as individuals who have earned at least $200,000 per year for the past two years or have a net worth of $1 million or more, not including their primary residence.
Buying a Commercial Property
Investing in commercial property is a different ballgame than buying a home or renting out an apartment. As such, aspiring investors should make sure they are assembling the right team before pursuing any deals.
It’s also important to understand how you will be able to finance your investment and to analyze market conditions. If you are new to commercial real estate, you may want to consider pursuing a CCIM (Certified Commercial Investment Member) designation or working with a firm that has experts on staff.
It’s also helpful to know why a current owner wants to sell their property. This can help you negotiate better terms, as well as pinpoint any red flags that may signal trouble in the future.
Buying a Flip Property
While HGTV shows make flipping look glamorous, it is hard work that requires substantial physical labor. It also requires a good eye for what can be fixed at a reasonable price and an accurate estimate of the house’s future value. Miscalculate either and your profits could be slim or even turn into a loss.
Flippers often purchase foreclosed properties, or homes that have been repossessed by a bank due to the homeowner failing to pay their mortgage. However, it is possible to find houses on the market that have not yet been foreclosed and are therefore still eligible for traditional mortgages.
Another way to invest in real estate is through REITs, or real estate investment trusts. These are funds that invest in real estate with the added benefit of a dividend payout. This can be a good option for investors who want the returns of real estate but do not have the time or interest in managing property themselves.