Most people are not cut out for the demands of being a landlord. Constantly getting calls about broken faucets and continually running toilets is not glamorous. Not to mention having to borderline harass people just to get the money they owe you. But, investing in real estate can be highly lucrative and even flashy when you do it right.
It is a perfect way to diversify your investment portfolio and provide a steady income stream. And many of the most successful real estate investment strategies do not demand the need for dealing with tenants directly. Unfortunately, knowing how and where to invest in real estate is not a skill taught in high school (though maybe it should be). Our multifamily real estate accredited investors want to share these tips for starting out in real estate investing:
Investing in REITs gives you the value of real estate investing without the physical real estate. These companies own commercial properties like hotels, apartments, retail spaces, and office buildings and are commonly compared to mutual funds. They are a typical retirement investment due to their tendency to produce high yields. Many investors automatically reinvest REIT dividends to grow their nest egg further because they don't want or need the regular income.
REITs can be a good investment, but they are also complex and varied. Some are not traded publicly, while others trade similarly to a stock exchange. The risk you take with them depends on the type of REITs you purchase. For example, it is challenging to value and sell non-traded REITs. Experts encourage new investors to use brokerage firms to buy publicly-traded REITs until they understand the game's intricacies. Get started with these investments by opening a brokerage account with no initial investment. But keep in mind that REITs usually require minimum investments.
Think about companies like Lending Club and Prosper that connect investors with borrowers who need money for a variety of personal needs like home renovations, paying off credit debt, or weddings. Online real estate investing is a very similar process. The platforms connect investors with real estate developers who need equity or debt-based financing for their projects. Investors bank on receiving quarterly or monthly distributions for paying a fee to the platform and taking on considerable risks. These real estate investments are illiquid and speculative, so you can't get rid of them quickly like when trading stocks.
The main drawback is that you need plenty of money to make money. The majority of online investing platforms are open to only accredited investors with a net worth of a million or more, excluding their primary residence, or people who earned more than $200,000 both of the last two years. There are some alternatives, including RealtyMogul and Fundrise.