Real Estate Investments

Are you interested in finding a new income source? Consider these real estate investment tips.

Real estate investing is a huge business. According to 2021 statistics released by Pew Research Center, 72.5 percent of rental properties consisting of single units were investment properties operated by individual landlords. Similarly, investing in real estate and reselling it at a profit (commonly called house flipping) is also a big business. The same is true of several other forms of real estate investment.

Real estate investment is a potentially great income source. It is also flexible. You can choose how much time and money you spend doing it, making it a viable side income or primary income source. However, you must understand what real estate is and how investing in it works. You also need to know what your real estate investment options are. There are many questions you may have regarding exactly how much you can make by investing in real estate or how much to invest in the beginning. Those answers and more are provided below.

What is Real Estate?

Real estate is defined as real property and items or structures that are permanently or nearly permanently attached to the property. For example, houses and barns are considered part of real estate. However, trees, farming crops, and water features are as well, even though they are often removable or changeable. 

Before investing in real estate, you must understand not all property types are the same. There are several categories of real estate properties. You may want to focus on investing in a particular type, or you may choose to diversify. The primary categories are these:

  • Residential properties consist of buildings like homes and apartment complexes

  • Commercial properties consist of offices and other business-related structures, such as stores.

  • Industrial properties are those devoted to various industries and production purposes, such as factories.

  • Raw land real estate is land that has not yet been developed to include industrial, residential, or commercial structures.

  • Special use real estate is real estate that is designed for one purpose. It typically cannot be easily converted to another purpose without investing a large sum of money. Examples of special use real estate include amusement parks and sports arenas.

Why Should You Invest in Real Estate?

You may already know why you want to invest in real estate. For example, you may want a profitable hobby or a job that allows you to be your own boss. What you may not know are the additional reasons you should invest in real estate. There are many, but here are some of the top reasons many people choose to invest in it:

  • You can rent properties you invest in to earn extra income.

  • Real estate properties can help you earn money for retirement.

  • The equity in one property can allow you to invest in more properties and increase your income quickly.

  • Real estate values often increase, allowing you to profit from your investment more often than you can investing in less predictable mediums, such as stocks.

  • Real estate investment provides several beneficial tax breaks.

How Much Should You Invest in Real Estate Initially?

“How much should I invest to start?” is a question you may have when entering the real estate market. The answer depends greatly on your circumstances. In short, invest what you can afford to invest in the type of property you prefer. If you are investing in a residential property, prepare to spend a down payment of at least 20 percent initially. Investment requirements for commercial and other properties vary.

Beyond the initial investment, what you need to spend varies based on your intent. For example, you can buy a cheap residential property, but you may have to invest as little as $1,000 or $10,000 or more in fixing the property before you can resell it at a profit. That is why you need to know your budget and investigate properties that interest you thoroughly, if you want to make a hands-on real estate investment.

How Do You Begin Investing in Real Estate?

When you think of real estate investing, a hands-on property purchase may come to mind. That is certainly a good option, if you have the time and money to invest. If not, take advantage of other investment options. Some examples include:

  • Invest in a real estate investment trust (REIT) that uses funds from multiple investors to purchase and sell properties. 

  • Invest in a real estate investment group (REIG) that allows you to purchase smaller properties, such as single units within large apartment buildings.

  • Join an online real estate investing crowdfunding service so you can invest a small amount initially and use profits to increase investments later.

What Are Some Top Companies That Can Help You Invest in Real Estate?

If you are unsure how to begin investing in real estate or are low on investment capital, crowdfunding is probably the best option for you. It is a hands-off way to invest without the need for major effort. You do not have to worry about fulfilling property upkeep or landlord duties. Instead, you can often invest in properties that are not even in your state, and it takes very little money to start. Here are some of the top online real estate crowdfunding companies that can help you:

  • Fundrise is a crowdfunding site that also provides several tools and assessments you can use to select properties in which you wish to invest.

  • RealtyMogul focuses primarily on commercial real estate investment.

  • CrowdStreet is the largest online commercial real estate investment crowdfunding company in the United States.

  • Arrived is a residential real estate crowdfunding service with a $100 minimum investment requirement.

  • Goundfloor allows investors to provide funds to developers working on new real estate projects. The low $10 minimum makes it easy for anyone to invest.

How Much Profit Can You Make in Real Estate?

There is no limit to how much profit you can make in real estate. That is why real estate investment is attractive to many people. However, specific amounts you earn are influenced by how and how much you choose to invest. They are also influenced by the types of properties you choose and where those properties are located. Regardless of the method you choose, do not expect to get rich quickly. However, you can turn small initial returns into a diverse and profitable portfolio over time.