Saturday, 22 June 2019

5 Steps To Start Investing In Real Estate

5 Steps To Start Investing In Real Estate

In this article, I am going to go over 5 ways you can invest in real estate even if you don't have the money to go out and buy a property. And without wasting time, let go straight to the article.

1. Investing in REIT Stocks

A REIT is a Real Estate Investment Trust. And that's just a fancy way of saying that, a REIT is a company that owns and invests in real estate. When you invest in a REIT you don't own the physical real estate itself, you own shares in the company that owns the real estate

Theoretically, if real estate values rise so should the value of your REIT.

But the power of REITs goes way beyond that, the thing that makes REIT so special is that they are required by law follow the 90% rule which says that they have to pay out 90% of their taxable income to shareholders through dividends.

That means if you're looking for passive income a REIT is a great place to start because they are required to pay back most of their profit which comes through things like real estate rental incomes back to their owners through dividends and you don't have to do any of the work.

To give you an example of what I mean, CP executive, did a study and they found that the average dividend for a healthcare REIT which is a REIT that invests in senior housing, hospitals, and other healthcare buildings, the average dividend in 2018 was 6.1% over the year and that doesn't factor in any appreciation.

You can compare that to your bank savings account, are you guaranteed to make money when you invest "NO" you might even lose money, but this is why it's so important for you to do your due diligence

The way you invest in REITs is the same way you invest in a stock. You have to open up a stock brokerage and then you figure out which REIT you want to invest in and then you fund the trade


2. Becoming a Partial Equity Owner

You can be a partial owner in a real estate deal like, let's say you find a $100,000 property that you want to invest in but you don't have the money to buy this property yourself, so you can go out and find other people who have money that wants to invest in this deal and you can put it together and then you can keep a percentage of equity in this property.

You can also negotiate some ownership for putting in the work to find the property and renovate the property and manage the property properly, just remember any time you invest in real estate you should always have an attorney on your side so make sure you speak to an attorney in your area before you do this


3. Real Estate Crowdfunding

The way real estate crowdfunding works is you invest a small amount of money and then your money is pooled together with the whole bunch of investors and then this money is used to go out and buy real estate and you get your share of the profits

One thing to remember with crowdfunding is that you're not usually getting actually ownership in the property, you're just getting your share of the appreciation and your share of the rental income minus expenses

But that is not too bad because you don't have to do any of the work.


4. Turning Your House Into an Investment Property

If you own your house right now and you are thinking of moving instead of selling your house, you could rent it out and turn this property into an income-producing property.

  • And now you can create a new stream of income because you have rent coming in from this property and this rent should ideally cover your mortgage, your expenses and put some money in your pocket.

One quick point on this, you usually have to live in your home for at least one year before you can turn it into a rental without any problems, so make sure you speak to an attorney before you do this to make sure you're not running into any issues


5. Buying Real Estate Creatively Like Through a Land Contract

I don't need to tell you that you can go out and buy a property with cash or get a loan from the bank to buy a property. Everybody knows that. So let me talk about creative financing.

If you want to buy a property and you don't want to go to the bank to get the money to buy it or you can't go to the bank to get the money to buy it, you can ask the seller of the property to give you the money so you can buy their property

This types of seller financing are usually called a land contract and you have a way more negotiating room of the terms of a land contract than you deal with negotiating a mortgage or a loan with the bank

I've seen deals where buyers didn't have to make any payments to the seller for 6 months, this way they had time to come in to renovate the property and start generating some income before they had to make a single payment.

It's all negotiable but it is still debt, so if you don't make your payments, the seller can come in and they can foreclose on the properties so you have to be smart.

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