American entrepreneur Marshall Field once said, “Buying real estate is not only the best way, the quickest way, the safest way, but the only way to become wealthy.” There’s money to be made in real estate depending on how you calculate your risks and variables. If you have the capital, big or small, there are several ways to invest in the property market online or offline. You can also have a piece of the action without becoming an owner by making use of various real estate financial instruments.
Buy Physical Property to Rent or Sell
There are little to no barriers to entry in the real estate, but you need time or money or both to succeed. Finding the money to buy property requires some thought, but there are several ways to raise capital including personal savings, home equity loans or mutual funds. You can also take over someone else’s mortgage, lease a property with the option to buy or go with a partner if you don’t have money for a down payment. Offering a higher price for an estate and skipping the down payment is another possibility as well as swapping properties.
Having said that, buying property for rental or to sell later can become a lucrative option. The key is to study the market or the piece of investment you are eyeing and determine its return on investment (ROI). Simply defined, ROI is the gain from investment minus the cost of investment divided by the cost of investment. While the formula looks simple, there are many variables that play including repair, maintenance and renovation costs. Plus, you need to include closing costs, advertising, appraisal and commissions before a property is sold to see the ROI.
Put Your Money in Real Estate Crowdfunding
Real estate crowdfunding is another way to get a slice of the pie. Investment costs are low and it is easy to use. Whether you are saving up for your pensions or just want to diversify your financial portfolio, you can become an investor for as little as $500. Real estate crowdfunding projects range from $100,000 to $25 million which means that there is an option for all sorts of investors and types of investment.
Crowdfunding has the potential to bring secure and vigorous returns on investments. It also provides opportunities for you to put your money in promising real estate across the world and on multiple properties. By 2025, real estate crowdfunding is expected to be worth more than $300 billion according to Forbes. Fundrise, RealtyMogul, RealtyShares, RealCrowd and CrowdStreet are examples of real estate crowdfunding sites.
Benefit from Real Estate Financial Instruments
If the first two options are not appealing, there are various financial instruments with low costs. Take real estate mutual funds which are professionally-managed pooled funds that are used to buy commercial property. Income is earned from the shares of investors. An exchange-traded fund or EFT is a collection of stocks. They are traded as common stocks and subject to price fluctuations in a day.
You can also buy stocks in a real estate company that deals with hotels, buildings, office space and timeshare companies. Likewise, participate in a housing construction company that builds or rehabilitates housing communities. Just be sure to do your research thoroughly before parting with your money.
Real estate is a profitable investment provided you treat it like a business and nurture it. Finding great deals, evaluating an investment including its ROI and looking for ways to finance any future purchases are instrumental in your success.