There are two ways in which we can grow our fortune – we can either earn an income by working, or we can invest our assets, so they increase in value over time. The latter option is especially attractive since it can boost your bank balance without strenuous work. Though there are several investments you can make, many people put their money into real estate since it is a solid way to build wealth.
As stated by HighestCashOffer.com, some people think it is too complicated or requires too much money to buy a house, an office, or an apartment and rent it. That’s why a lot of them buy damaged or probate properties only to make some repairs or proper renovations and look at how to sell house fast for cash.
However, direct property ownership is not the only real estate investment option. Nowadays, you can take advantage of real estate crowdfunding, REITs, real estate ETFs, mutual funds, wholesaling, hard money loans, and real estate syndication.
As you can see, there are several options available, and they will allow you to reap the benefits of real estate investment without having to take on the responsibility of property maintenance.
REITs
REITs (real estate investment trusts) are a great way to invest in real estate without having to buy a property directly. A REIT is a type of company that owns, operates, or finances income-producing real estate. They are required by law to distribute at least 90% of their taxable income to shareholders in the form of dividends.
REITs offer several advantages, such as being professionally managed, diversified, and liquid (they are traded on major stock exchanges). And since they must distribute most of their earnings to shareholders, they offer high dividend yields (usually around 2-4%). This is especially good if you need cash quickly or simply want to diversify your portfolio.
Real Estate ETFs
Another option is to invest in a real estate exchange-traded fund (ETF). An ETF is a type of security that tracks an index, a commodity, bonds, or a basket of assets. Real estate ETFs are very similar to REITs. They both allow you to invest in the real estate market without directly owning any property.
An ETF for real estate is traded on an exchange like stocks and is backed by the real estate held by the trust. This allows you to invest in real estate from your brokerage account.
Real estate ETFs are attractive because they offer diversification and liquidity. They are also cheaper than direct ownership since management fees are lower, and they can be bought using your existing stocks and bonds.
Mutual Funds
Another option is to invest in a mutual fund. Mutual funds are investment companies that pool money from investors and use it to buy stocks, bonds, money market instruments, and other securities. The advantage of investing in a mutual fund is diversification (you can own hundreds of stocks with just one transaction) and liquidity (you can exit whenever you want).
There are several types of mutual funds, but the ones you should be interested in are called real estate mutual funds. These funds invest in properties across various asset classes, such as commercial real estate, office buildings, hotels, and multifamily properties.
On websites like Alpha Spread, you can uncover more investment opportunities that could go into your mutual fund, or you could simply find individual stocks separate from the fund. However, in regards to stocks that go into your mutual fund, the ultimate decision should typically lie with your financial advisor.
Wholesaling
Wholesaling is a type of real estate investing where you find deeply discounted properties and then look for someone who wants to buy it, contracting the property with a buyer at a higher price than with the person selling it. It is a great way to make money in real estate without having to buy a property directly.
To be successful at wholesaling, you have to be good at finding motivated sellers and negotiating deals. You also need to have a solid understanding of the market to quickly find a buyer for the property.
Hard Money Loans
Hard money loans are another way to invest in real estate without buying the property directly. With this type of loan, you lend money to a private investor to finance the purchase of an investment property. The interest rate is higher than a traditional loan, but so are the returns.
These loans require little to no documentation, and you can fund loans from $5,000 up to $2 million. They also have a quick turnaround time (usually just a few weeks), and you can close more deals in the same time frame than with other types of loans. Lastly, hard money loans are usually used for short-term projects, such as flipping houses.
Real Estate Syndication
Real estate syndication is the final investment option for those who want to invest in real estate without owning property. This is a process where multiple investors come together and buy a property as lenders. The money is then used to purchase a property, which is then divided into shares (or units), and each investor gets their share of the income generated by the property.
As a syndicator, you will be responsible for collecting funds, finding and acquiring the property, and managing the whole process. That is why you need an accredited investor status. The downside is that you must find someone to buy your share of the property. But if you can do that, you will have access to properties without paying the whole sum.
In Conclusion
Real estate is a very stable investment asset that can provide passive income, and it is an excellent way to build wealth. If you have the money or are willing to take out a loan, you should consider putting your money into property.
However, it is not the only way to get a piece of the pie. You can also benefit from real estate crowdfunders, REITs, real estate ETFs, mutual funds, wholesaling, hard money loans, and real estate syndication.
All these options can help you invest in real estate without having to buy property, which is an excellent solution if you do not have the means to make the big purchase. Another advantage of this approach is that you won’t have to deal with tenants or repair costs which are usually associated with direct ownership.
