Updated May 27, 2020
By Alline Russell
Real estate investments are gaining popularity in recent years, and there is a good reason why. This type of investment offers lucrative options for return and has a series of benefits.
The best advantage of real estate investment is the possibility of tax benefits, the high tangible asset value of real estate, and the fact that real estate provides better returns than the stock market, and there is no such high volatility. In addition to that, an investment in real estate will diversify your portfolio.
Real estate investment is a good step for both new and seasoned investors. There is a great variety of options that you can choose from – some of them bring higher returns but also contain more risk. There are specific deals on the market that are better handled by experienced investors. On the other hand, various options offer a safer approach while still generating sufficient returns.
There are six ideas on how to invest safely in real estate if you are not a risky player.
Invest in a Long-Term Residential Rental
Investing in rental property is one of the most traditional approaches to making money in real estate investments. It is a standard method that involves buying a property and keeping it for the long term to make money out of it.
Residential rentals are a great way of securing income without too much trouble once you find the right property. To do that, you need to research the market following one main principle: location. A great location is what makes a property appealing to tenants. One of the best shots is to buy a property, which may even be in bad condition, as long as it has a great location. In this case, you will get an increased asset value over time.
The next step is to find a long-term tenant and rent out the property quickly. To make the process of being a landlord, you can opt to hire a property manager. This step will let you buy rental properties, even in locations that are far away from you. You can make use of rental property management services in Orange County, CA, for example, and reap the benefits of an excellent long-term rental at a great location without having to do the hard job. You get to pay the property manager about 8-10% of the gross rent, but they take care of all the issues related to the property – small repairs, collecting rent, finding new tenants. You reap all of the benefits of being a landlord more safely without all the hard work.
Invest in Vacation Rentals
Vacation rentals are another very lucrative option for making a profit with real estate investments. You can have a substantial passive income flow in case you chose a highly desired tourist site. Whether you want guaranteed profits from these short-term rentals, Los Angeles, Miami, or other popular tourist locations is your best option.
Another benefit of vacation rentals is that you do not have to own the property to make money. You can manage it during the vacation period. To find such properties, you need to connect with the property owners in the tourist area you have selected. Make bonds to create a network, and you will be able to profit from this type of real estate investment successfully.
Invest in Home Construction
People will also be looking for a home. After looking at the real estate market growth for the past few years, you can see that there is a significant growth, which is partially due to the limited housing inventory. Hence, the predictions for the upcoming few decades are focusing on a construction boom. New homes will be developed in new neighborhoods, and older ones will be rehabilitated to meet the growing demand.
Investing now in home construction is a smart and relatively safe path to gain a good return on your real estate investments.
Invest in a Real Estate-Focused Company
Another way to safely invest in real estate is by finding a company that owns and operates real estate and invest in it. Examples of such real estate-focused companies are those that own hotels and function as resort operators or commercial real estate developers.
To be successful and safe in your investment, you need to show due diligence and research well the companies before buying stock in them. You can also take advice from a financial expert or other more experienced investors.
Invest in Real Estate ETF
ETF is an exchange-traded fund, which represents a collection of stocks or bonds in a single fund. ETFs offer great diversity and low costs and are an excellent option for someone who wants to invest in real estate in a more non-traditional way. An estate-focused ETF is a smart investment. There are a significant number of such funds that target a specific group of real estate. Some invest in stocks related to the purchase of office buildings and hotels, while others focus on domestic real estate stocks.
You need to research the various possibilities and choose the ETF that offers the right exposure to real estate, which matches your investment plan.
Invest in Real Estate Mutual Funds
Another alternative to direct investment in real estate is choosing a real estate mutual fund. One of the advantages of such funds is that they are low cost, and once you select one with a track record, you can be confident about the future returns of your investment.
To select the right real estate mutual fund, and feel safe about your investment, look for low fees, broad diversification, and history of successful investments. A good portfolio and a significant amount in assets are also a great sign to direct your investments.
Investing in real estate can be as risky as any other investment. Choosing the right properties and options to invest in, however, can guarantee a safer and better return even though not the highest possible in the field. Invest wisely using the ideas above, and you will be able to reap the benefits of your smart moves for longer.
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