Looking to make a little extra income? Everyone would like to find something to invest in, but it’s hard to know what and even harder to understand how. Real estate, for all its troubles, has one distinct advantage over other investments: people will always need a place to call home.
Here are four ways to start investing in real estate, demystified for beginners.
Rent out property
One of the easiest ways to get started in real estate without risking too much is to invest in rental property. You can begin by renting out a room in your own home, or you can buy a whole new property which is either already set up for rentals or can easily be converted.
Renting is one of the safest and least complicated real estate investment routes for beginners. Among its numerous advantages are tax benefits and a steady flow of income. As long as you have tenants, you’ll always have an income stream. The only downside is that it’s a long-term investment that requires constant maintenance.
Flip old houses
If you’re looking for something a bit more involved than renting out rooms, becoming a house flipper might be for you. While it usually requires a bigger investment, you can also earn a much bigger return.
House flipping is a practice in which an investor buys a property, then invests significant time and money into increasing said property’s value through renovations and repairs. Being a house flipper is perfect for investors who prefer a more hands-on approach. Consistent success, however, requires quick turnarounds
Join a group
Here’s an attractive option for those who’d rather not get into real estate alone: starting or joining an investment group. The appeal of an investment group is that it allows multiple investors to pool their resources when buying a property, and also allows the various responsibilities that come with owning a property to be divided among those most comfortable with them.
Online crowdfunding platforms are becoming increasingly popular in real estate. These are similar in many ways to local investment groups, with the added bonus of having an even bigger pool of investors and a wider diversity of potential properties. A California investor can have a stake in Vancouver real estate, without ever having to get on a plane. Groups can also put you in touch with good real estate attorneys, lenders, or brokers who can help you find deals.
Look into REITs
Last but not least, consider looking into REITs, or Real Estate Investment Trusts. An REIT is a company that owns properties that generates income through commercial means. Examples include office buildings, shopping malls, hotels, hospitals, and the like. The REIT then sells you a share in the ownership in its proven money-making properties.
Like with investment groups, REITs allow you to invest in real estate without having to worry about taking on management or maintenance. Beginners should steer clear of REITs that aren’t publicly traded, however, which promise high reward but threaten equally high risk.