It’s one thing to earn a paycheck, but it’s another thing to put that money to work for you. Real estate is very attainable for a lot of people, and it can be a great way to diversify out of the stock market. Approximately 90% of America’s millionaires are invested in real estate, which should tell you something.
Here are five strategies you can use to get into real estate.
Like any other investment, you need to have money to get into real estate. If you don’t have the money yet, focus on making more and spending less. Pay off any debts, and have a budget that will allow you to grow your cash reserves.
Mutual funds can be an easy way to invest in real estate, but they can also be index funds or ETF’s. Pay close attention to what they own. What types of real estate do they invest in, and where is it located? Are their properties purely in the US, or do they invest internationally? You also want to figure out how much you want to allocate toward it. This will typically be 5% or 6%, but it might also be 8% (depending on your risk tolerance).
There are many types of REIT’s (public, private, etc.), and they could be tied to both residential and commercial properties. It’s a popular way to invest in real estate, but you have to be careful. You need to be an accredited investor, so you must meet certain income and net worth qualifications. They do, however, come with certain tax benefits, but you’ll have to wait until you get into a higher income bracket. You also need to pay attention to fees, which can affect your return.
If you want to invest in real estate, this can be an option. But it’s not as easy as it looks like on TV. You need to run the numbers, because it’s about a lot more than the mortgage. You’ll have to think about HOA fees, insurance, taxes, maintenance, and a variety of other costs. Management is also an important consideration. Do you want to manage the properties yourself, or do you want to hire a property management company? Either way, it will cost you some money.
This has become extremely popular option, especially in the commercial space. Getting into real estate with a group of people can be a great option because you can invest into big apartment complexes and office buildings, but you need to be careful. While it can be an entirely passive option with some significant tax advantages, you will usually need to be an accredited investor. You will also need to have a certain net worth and income level.
Real estate can be a great investment, but it does have its risks. Think through it, and make sure it fits your risk tolerance. There isn’t a single investment that doesn’t have risk. But no matter where you decide to put your money, you want your allocation strategy to bring you closer to achieving your financial goals.
For more advice on how to get into real estate or how to invest your money overall, be sure to reach out to Trevor Shakiba at Shakiba Capital.
Identifying commercial real estate syndications is a more involved investment strategy which usually only available to accredited investors. It can be much harder to find sponsors than it is with other passive investment opportunities.
If you want to get the most from your work as an investor, you need to learn how to balance short-term satisfaction with long-term rewards. Otherwise, you can end up in a downward spiral from which there is no escape.