How to Invest in Real Estate



How you invest in real estate depends on how hands-on or passive you want to be,

your level of risk tolerance and what you’re looking to accomplish with your

investments. But you’ll have a lot of options, including directly purchasing property

and investing in real estate funds or online real estate platforms.

Most people’s first foray into real estate investing is buying a home. That’s a great

place to start and one of the best things you can do for your financial health,

especially if you pay it off early enough to avoid PMI (private mortgage insurance).

But buying a home is not a long-term investment strategy.

Rather, the best way to use your money in real estate is as a hedge against inflation

and to help you achieve financial freedom by building wealth through rent payments

and equity growth over time. The article covers the different ways to do that, from

renting out rooms in your own home to buying properties to lease and improving

them so you can eventually sell them for a profit.

There are also a variety of ways to get into rental property without having to buy a

single piece of property yourself, such as using investing apps or brokerages that

offer fractional investment opportunities in individual homes and buildings and

larger residential real estate portfolios. While these won’t generate the same

amount of rental income as owning your own property, they’re good alternatives for

those who don’t have the cash to invest in properties themselves or who want to

diversify their investments. Also read:

If you’re a DIY investor, the most important consideration is your personal skill set

and your ability to deal with the ups and downs of owning property. You’ll need to

have the resources for a down payment, repairs and ongoing maintenance. You’ll

need to learn how to analyze the market and identify the most desirable

neighborhoods. And you’ll need to understand the various laws, fees and

requirements of landlording. If all that sounds like a lot of work, you’re right. But

that’s exactly the point: it’s hard work.

Many people mistakenly believe that “if you know what you’re doing,” real estate is

a sure thing. It doesn’t work that way, though. There are a lot of things that affect

real estate that you can’t forecast or control, such as interest rates and market

fluctuations. And there are a lot of bad things that can happen to your investments,

even if you’re doing everything correctly.

Investing in real estate is a good way to add diversification to an investment

portfolio because it generally has a low or negative correlation with stocks. But you’ll

need to do your research, and remember that it can still be a risky asset class. You’ll

need to keep your expectations realistic and minimize your taxes and transaction

costs. Otherwise, you’ll be kidding yourself about your returns. And that’s a

dangerous game to play. You’ll probably lose more than you gain if you do.