When people talk about real estate investing, what do they even mean?
There are tons of ways to invest in real estate, from flipping to rentals to crowdfunding. It's important to realize first that investing in real estate doesn't have to be scary or intimidating. If you own a home, you have already invested in real estate, and your odds of making good returns are much better than stock market shares in most cases. The more you pay into your existing loans, the better your equity position, or the amount you stand to gain on the value of the property you already own.
In buying further properties to invest in, there's a lot to learn, but here are some basics.
Why should I invest in real estate?
Depending on the kind and size of your investment, real estate investing has lots of advantages. It can generate passive income (as from rent on properties you own and lease out), profit from appreciating property values, and tax incentives like reducing net income that is taxed on your annual filings. It can also generate wealth without needing huge amounts of initial financial strain, if you can use leverage for purchases and investments using capitol from elsewhere.
If you are interested in getting the true benefit of real estate investing over time, consider an investment strategy that creates short term monthly cash flow gains, longer term appreciation increase to your overall wealth, and annual tax deductions to reduce net income.
What are the kinds of real estate investment available?
Investing in real estate can be the best way to leverage current money on hand and create future wealth and stability, as well as generating ongoing benefits.
Certainly the first and most common means of investing in real estate is buying a primary residence. Many market watchers have noted that home values have nearly doubled in the last 10 years, and there is reason to believe that home owners will continue to benefit from booming home prices and the increase in equity they bring.
If you are hoping to invest by purchasing additional properties outright, the main options are residential properties, like single-family rentals (SFRs) and small multifamily buildings, commercial properties like offices and shopping centers, industrial properties like storage and warehouses, and land for future development.
Among the options listed above, the most common for new investors is SFRs, or single-family rental homes. Many investors find that purchasing a property to rent to others fulfills their financial goals for investing and also allows for passive investment, when the owner contracts out for others to manage the day-to-day property management tasks associated with the dwelling. This option provides cash-flow income, equity growth, and tax incentives, and with a rental market growing at historic rates in recent years, the potential for building wealth from these kinds of investment are almost limitless. This type of investment can also be more financially accessible for new investors than larger or commercial properties, which may be more competitive and general come with a higher initial price tag.
There are also options for investing in real estate by participating in real estate investment trusts (REITs), which are companies that buy and manage different types of real estate, including residential properties, student housing, commercial property, and even cell towers. Similarly, real estate exchange-traded funds (ETFs) are collections of real estate securities that can be purchased on the market. While these kinds of investment can be a great option for some, it should be noted that both are more like stock market investment (purchasing shares of publicly traded assets) than outright ownership, which means less profit and less control than assets you own yourself. These types of investments can also be less flexible, sometimes including limitations on when and how your funds can be drawn.
So how do I get started?
Investing in real estate can be profitable and fun, but having an expert on your side is super important. Make sure that you are working with financial advisors and real estate representatives that know the market inside out and can help you pick the best investment for you!
As an experienced real estate team, Empire Home Group would love to look at your total financial picture and help you facilitate a rewarding start in real estate investment. Our team lead, Briana Schiavone, is a certified Investment Specialist with lots of experience investing and helping others do so. At the end of the day, investing in anything requires lots of good information and tons of trust, and you want to make sure the advisors helping you get started are the best in the biz!