Three Simple Yet Effective Ways To Invest In Real Estate In The Modern World

For 54 years in the US (from 1963 to 2017), the average house prices rose 19 times, from around $20 thousand to around $380 thousand. This circumstance alone makes investments in real estate lucrative. Just to compare, we give below the cost of various investable assets for the same period:

• gold changed from $309 to $1,400 per ounce (+353%)
• Dow Jones index rose from 6,425 to 24,440 points (+280%)
• silver rose from $11 to $19 (+72%)
• crude oil changed from $26 to $56 per barrel (+115%)
• dollar index did not change (0%)

Nothing for the same period showed +1,900% rising. That does not mean that buying a house in 1963, you’d simply watch as it gains price until 2017 without doing anything. Surely, some repairs and renovations are required. But even though you spend a full house price for these during its 50-year life period, it’d still give you a +950% rise at least. Isn’t it still obvious that owning, operating, and flipping houses bring more money than any other asset normally available for a regular person? The long-term price rise is obvious no matter what crises happen.

Below, we’re looking at 3 currently most effective ways to invest in real estate.

Rental properties as primal real estate investing

This is one of the most obvious and possible ways to start being a real estate owner. Becoming a landlord, you can start receiving monthly rent, which would make it possible to accumulate capital and pay for a bank loan, which you might have received to finance this purchase. You could start being a real estate investor of this type if you’re used to DIY towards anything, as the rental property will require a lot of fixes and small/mid repairs. Also, if you’re not overwhelmed about dealing with tenants’ requests, things breakages, and communication issues, then this is your thing. Alternatively, you might hire a managing company but that will eat a part of your profits.

Pros: you can buy several objects at once with bank financing with a humble initial installment from 5% to 25% of the property cost. You can also be geographically diversified (that includes different cities or even states). Cons: a possibility of a large vacancy rate and the need to deal with such issues as repairs, tenants, law compliance, taxes, and possible property price stalling.

Investing in real estate through property investment groups and trusts

One of the ways to receive profits with your hands off the daily management (as is the case with rental premises) is investing in trusts and funds. Basically, you purchase an equivalent of stocks or some other securities, which give you a monthly/quarterly/yearly profit. In some occasions, the profit is fixed; in others, it fluctuates depending on how well the managing company’s doing when it manages the pool of properties under its umbrella. You factually own a part of this pool, which is seen as ownership of some particular apartment/house or a faceless part of a fund, which might manage not only real estate but also other valuables. It also can be a family fund or some online property investment platforms, which diversify their investments, not primarily focusing on real estate alone.

Pros: a small yet fixed & predictable income; diversity of such investment options on the market. Cons: risk of encountering bad fund management or fraud, which only collects but not gives back.

Real estate investment through the house flipping

Real estate investments of this group typically include buying some undervalued, old, or discounted property, fixing and renovating it, and selling it for a bigger price, which compensates fixing + renovation and gives you a margin of profit, including payment of taxes. This option is good for small family-owned construction companies or natural persons, who are simply good in renovations and repairs (however, some types of construction works may still require a license).

It’s advised to consider this option if you do everything with your hands/hands of your paid workers, as then your profit is maximized. If you hire a professional team of construction workers from the side, you’ll significantly decrease your margin of profit (if you’ll have any at all).

Afterword

In the first and third scenarios, it is also possible to buy and hold hoping for the price to grow up – which is especially lucrative on growing markets. For instance, in rental properties, if you don’t earn anything on renting per se, in 10 years, the average cost of your real estate will grow from 2 to 5 times, allowing making money only on it.