What Are the Best Ways to Invest in Real Estate in 2020?

Posted On Friday, 06 March 2020 12:48

Investing in real estate can be one of the easiest ways to build wealth, diversify your investments, and retire comfortably. With the US real estate market currently experiencing a positive transformation, it is essential that you add real estate as one of your investment vehicles. In this article, we will show you five (5) ways you can invest in the US real estate market in 2020. 

What Are the Top Five (5) Ways to Invest in Real Estate In 2020?

Traditional Method

This is basically acquiring a piece of real estate property yourself. It can be either buying a piece of land that needs to be developed, a single-family home, an apartment building, or even a strip mall. It is mostly hunting for your own real estate investment or using a broker to bring you deals. Whichever route you decide to follow—whether you're looking at single-family or commercial, make sure you have the proper team around you. 

Real Estate Investment Trust (REITS) 

If you think investing in real estate is a great option but wouldn't want to get actively involved in the process, then buying into a REIT may be an option for you. REIT stands for Real Estate Investment Trust. It is a publicly or privately held company that owns income-generating properties. REITs allow small investor access to a more prestigious asset class, which is typically commercial real estate. So, REITs are usually comprised of commercial real estate properties such as Shopping mall, Senior Living, Strip mall, Multi-family, and several others. 

According to Dwight Kay, founder and CEO of Kay Properties and Investments “Real estate investment trust (REITs) is a great way for you to invest in real estate without being actively involved in the day-to-day activities. You only need to purchase equity or shares in the Real estate company. This allows you to receive potential dividends from its generated income. Remember that when investing in REIT, you do not own the property but shares within the REIT.” We maintain a diversified portfolio of properties and property types - medical office, multifamily apartment, office and triple net lease (NNN) properties - that enable our investors to select the real estate program that best suits their needs and objectives. These investment offerings are designed to potentially provide a stream of rental income and/or distributions, tax benefits and appreciation to our investors.

Online Crowdfunding 

In the past, when investing in real estate, there used to be a conventional truth: if you do not have the capital, you are out of the game. Investors in the Real Estate sphere were mainly wealthy individuals with hundreds of millions or access to financial manpower. 

The advent of the internet and the introduction of the JOB Act of 2012 made it possible for small investors to pool their resources together for investment purposes. This gave birth to what is today known as Online Crowdfunding. While Online Crowdfunding may be a new real estate investment strategy, it is fast becoming a highly-patronized investment method. Online crowdfunding allows you to pool your funds with others to invest in commercial real estate property. This is usually done through an online crowdfunding platform that brings together sponsors and investors. 

One of the upsides to investing in an online crowdfunding platform is that it is a passive investment with little to no managerial obligation on your side. That is, you do not have to source for the property, tenants, or deal with the common landlord issues. The real estate company (sponsor) handles the property sourcing, acquisition, management, and distribution of potential profits to the investment participants. Also, it offers investors a low-barrier entry minimum of around $5,000-$10,000. 

So, if you're interested in a passive stream of income or want to own a tangible building as opposed to a piece of a company like you would with a REIT, then online crowdfunding may be an option for you. 

Real Estate Syndication 

As a real estate investor looking to expand your portfolio, you may identify specific investment properties that require high down payment or beyond your financial capability. An easy way to acquire such type of property/properties is through a real estate syndication. A real estate syndication is a partnership between multiple investors. They pool their resources, experience, and capital together to acquire and manage a property that they otherwise couldn't afford individually.

Take, for instance, you discover a real estate property that requires a $900,000 down payment, but you are unable to finance it on your own. Instead, you invite two or more friends, form an LLC, pool your resources together, and purchase the property. Under a typical property syndication structure, there are two main categories of investors— the sponsor or general partner and the investor or limited partners. The sponsor is solely responsible for the acquisition, reporting, and management of the property. 

One of the upsides to investing in property syndication is that it allows you to purchase quality real estate, diversify your portfolio, and generate potential monthly rental income without being actively involved in the day-to-day running of the property. A significant downside is the lack of management control, liquidity, and market volatility.

House Flipping

House Flipping can be rewarding, but, at the same time, a bit risky. In a nutshell, house flipping is purchasing homes below their market value, fixing them, and then reselling for a potential gain. For instance, you buy a single-family home for $200k, spend $50k - $100k on repairs, and put it back on the market for $400k. If all goes well, you are in for a $100k to $150k potential profit. 

If you are a first-time real estate investor, house flipping may not be a great real estate investment choice for you. This is because it requires you to have a great deal of understanding of the real estate market, location, and buying needs. Besides, you may end up being unable to sell the property fast or for a potential gain. 

In conclusion

While investing in real estate may be a great choice, you must carry out adequate due diligence and hire the service of competent professionals to guide you through the process. 

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