We’ve all heard how investing in real estate can provide big payoffs, but most of us have also heard horror stories about poor investments. So, how do we avoid these poor investment choices when we want to take that leap and invest in real estate? Well, first and foremost, it’s in your best interest to center yourself and do some research. It’s easy to become overwhelmed during this process and some people have been utilizing CBD gummies in a way to take the edge off while conducting the proper research. This way, you can get all the facts while you’re cool as can be! Here are a few ways you can get started in the world of real estate investing. Just thinking about it like this, you’ll need to keep researching and keep learning about this new form of investing you’re planning on doing, but it’ll be worth it in the end!
Pros And Cons Of Tail Risk Funds
Editor’s note: This article is part of a series ValueWalk is doing on tail risk hedge funds. The series is based on over a month of research and discussions with over a dozen experts in the field. All the content will be first available to our premium subscribers and some will be released at a Read More
Investing Under Your LLC
Real estate investing can be very rewarding, but it can begin to feel heavy if you misstep. As a way of avoiding this “heaviness”, you can create an LLC and invest under your LLC to protect your personal assets if you happen to encounter a bad investment. The LLC works to avoid legal liability and prevents your personal assets from being confiscated. LLC stands for limited liability company for this exact reason and some of the largest companies in the world operate under this title. So, keep this in mind while setting up your investment accounts. It might be an extra step, but it can save you a headache and money in the long run.
Real Estate Investment Trusts
This is an option that became available to the general public around the 1960s when congress decided smaller investors should have the opportunity to invest in larger-scale properties that generated higher levels of income. This was normally reserved for the affluent and wealthy who generally had access to these types of properties. These real estate investment trusts (REIT’s) are stocks of commercial real estate properties such as office buildings, warehouses, hotels, etc. The process is somewhat similar to that of purchasing and investing in stocks. In order to qualify as a REIT, the company has to distribute 90% of it’s taxable income to the shareholders. You have to find an investment firm that you feel comfortable with and one that aligns with your current financial situation. Some investment firms have higher starting account requirements.
You also want to be mindful of the different types of REIT’s. Generally, equity REIT’s are less risky than mortgage REIT’s because they basically earn you a percentage as the property appreciates. An example of this could be rent payments or companies renting out office spaces. Alternatively, with mortgage REIT’s you’re only earning on the ratio of the net interest in comparison to the cost of the actual loan.
These trusts only require a few hundred dollars to get started and that’s why they’re the perfect starting point for anyone who is curious about investing in real estate. The best part of this is that you can take the money accrued and invest in a physical property of your own to either flip or flip and rent out. For this reason, it really is a great starting point!
Tax Deed Sales
This option requires a little more research on your part because it can definitely get a little more tricky, but it can be very lucrative if you master it. So we all know about property taxes, and if property taxes are not paid a tax lien is put on the property. Then, the mortgage holder is given a specific amount of time to pay this lien and if it’s not paid then the city will put the property up for bid at a public auction to the highest bidder. If you are the highest bidder, you acquire the property and everything that comes along with it. That’s why it’s very important to fully research the property and make sure you’re not taking on a house that has hidden issues. Once you win the bid and acquire the property, they take out the taxes and the overages and the property goes to you. Depending on your state, the process can vary and there are definitely a few more steps, but this is the basic outline. That’s why this type of investment takes a little more hands-on work and research, but if mastered, this type of real estate investing can provide you and your family with financial longevity.
Buy & Flip
This is perhaps the most common type of real estate investment that we all think of when we start tossing around the idea in our heads. Maybe we’ve all seen one too many HGTV shows about buying houses, fixing them up, and selling them. However, this type of investment can be a tad riskier and can take a little more money to get started. You need the initial investment to purchase the house and the needed funds to fix it up. You also have to keep in mind the fact that all kinds of financial issues can arise when you’re fixing up a house such as the plumbing, electrical issues, or even foundational issues. All of these things, plus more, can drive your investment price up. You can try to avoid these types of problems by having the house properly and professionally inspected. You should also keep in mind that you’ll probably have to hire a company to do the “fixing” unless you’re skilled in construction as well as the other areas needed for house renovations.
There are all kinds of ways you can get started in real estate. Some of the key factors that you need to consider: your baseline investment amount and how hands-on you want to be through the whole process. If you want something less hands-on, you might want to opt for the real estate investment trusts because the investment firm (or an app) keeps an eye on the stock and informs you as it rises or drops. If you can see yourself doing a little more digging and jumping over a few more hurdles, tax deed sales are an amazing real estate investment option that a lot of people don’t even know about. Or you can always go the traditional route—buy, fix, and flip! It’s never been easier to invest in real estate because you have so much information at your disposal online. What are you waiting for—aren’t you ready to be the next real estate mogul?