Being successful in real estate investing requires patience, dedication, and expanding on the investment portfolio.
To build wealth through real estate requires time and the commitment to leverage assets to purchase multiple properties in time.
There are multiple ways to get involved in real estate Investing. From crowdfunding and REITs to rentals, flipping, and wholesaling. Finding the right opportunity to match your investment objectives takes time, but there is an investment opportunity for everyone with the interest and means.
Leveraging
Before discussing the various ways to invest in real estate and expand your real estate portfolio, understand the most significant advantage real estate offers over other investment strategies.
Real estate allows easier access to funds than other investment types and can be leveraged into the individual investor to build wealth.
Here’s how it works; real estate is costly and requires funding.
An investor takes a mortgage loan out from a lender, takes hold of the real estate, and over time the value of the real estate is worth more than the loan. The idea of using someone else’s money to make money is the concept of leveraging.
In other words, leveraging uses borrowed capital to increase gains, but there are some risks involved, such as;
- Depreciation of values
- Vacancies in rentals
- Mortgage payments
Investment Vehicles In Real Estate
There are lower risk investment opportunities and higher risks of exposure for the real estate investor.
Low-risk investments are through REITs and crowdfunding that lowers your investment and provides lower returns.
Higher risk investment opportunities, such as fix and flip (or flipping), require the investor to put up a lot more individual capital to fix things like plumbing or other basics that will show up on any inspection, or that even casual potential buyers would notice. This is done in order to improve the value of the real estate to make a profit.
In the middle of risk and reward is buying and holding to make long-term gains and wealth over time. For example, investors in this category may buy homes to hold and wait for the appreciation before selling or choose to rent to make a stable, regular income.
The key in making any of these real estate investments profitable is to leverage the funds you can and know the market.
REITs
REITs are a way for investors to purchase property with other investors, lowering the exposure for each investor. The additional benefit to REITs is that the purchasing power of the REIT is going to be stronger than an individual investor, allowing more significant residential and commercial investments to be possible.
The drawback with REITs is that you own only a percentage of the investment as an investor and don’t have the control over the investment like you would if you acted independently.
Buy-and-Hold: Buying real estate to hold until it appreciates selling or renting to make a monthly income is a concept of holding properties.
Flipping: Flipping is the practice of buying a property to sell it quickly for a profit.
Here’s how it works: An investor buys a property below market value, invests money to improve it, and turns it over for a profit in less than a year.
Skills needed to make flipping work for you are networking to find a property below market, making improvements that aren’t costly, and selling at a markup that is worth the time and energy.
Wholesaling: Wholesaling is the process of an individual acting as the go-between of the seller and buyer, often at an agreed-upon fee for bringing the transaction to fruition. The role of the wholesaler is to act as an intermediary, a bridge between seller and buyer. The way it works is that the wholesaler secures a contract from the seller to provide a buyer and is paid a fee for that action.
In most parts of the country, wholesaling is legal with certain limitations, often requiring the individual wholesaler to hold a real estate license. So if you have questions on is wholesaling real estate legal In Montana? The answer is yes, with a permit.
Whether you’re looking to invest in real estate for a short, quick profit or looking to build long-term sustainable wealth, there are plenty of vehicles to invest in.
Utilizing the idea of leverage also allows the savvy investor to make a wise investment that limits exposure and individual risk and is a fantastic strategy for successful real estate investing.