How to Invest in Real Estate

Learning how to invest in real estate can be a worthwhile financial venture. For those starting out, there are many common ways that you can invest in real estate, actively or passively, in order to bring on an additional form of income.

Types of Real Estate Investing

One of the first things you should do when starting off in real estate investing is the difference between the two types: active and passive.

Active Real Estate Investing

Active real estate investing is probably what you think of when brainstorming investment ideas. Essentially, it is the actual act of buying and managing a property for income from rent or renovations. Active investing is a more hands-on experience.

Passive Real Estate Investing

On the other hand, passive real estate investing requires less direct involvement from you (after researching deals). With passive investing, your money, paired with your selected partners or sponsors, will do most of the work.

There are 3 popular ways that most people get into passive real estate investing:

1. REITs: A REIT, or ‘Real Estate Investment Trust,’ is a company you can invest in who owns income-producing properties.

2. Crowdfunded Investments: Using several different websites or companies, you can pool your money with other investors to purchase, develop, or renovate a property.

3. Syndications: Similar to crowdfunding, you’ll pool your money with other investors to invest in a property, this time managed by a third-party sponsor.

3 Ways to Start Investing in Real Estate

1. Get Involved in Passive Real Estate Investing

If you do not have the time needed for an active investment but want to put your money to work, try investing in one of the passive forms of real estate investing we mentioned above. This can be a good entry point into real estate, especially if you are too busy to actively manage a property.

2. Invest in Rental Properties

Though this can be a major commitment, it is also a way to get a steady income from your investment that could appreciate over time. But it takes a lot of time, effort, or money to manage and is known as one of the most labor-intensive ways to invest in real estate.

There are two main types of rental investments:

Long-Term Rentals: Long-term rentals are properties that are designed to be rented for typically at least one year. This provides a steady, month-by-month flow of income.

Short-Term Rentals: Stays at a short-term rental could be as short as one night. This could be a unit in a larger complex, a guest house, or even a room in your home. Be aware that many communities and developments are curbing the use of real estate for sort term rentals.

3. Flip/Renovate Properties

A quite common real estate investment strategy is to buy, renovate, and flip a house for a profit. This method of investment also takes a lot of work in researching neighborhoods, construction/renovation costs, and a large up-front cost of buying the property. Though risky, flipping homes can be a lucrative effort and you can even choose to run the property as a short or long-term rental.

Whichever way you choose to go, be aware that investing in real estate can be risky. Market values can fluctuate for a host of reasons and evicting non-paying or destructive tenants can be costly and time consuming. 

To learn more about investing in real estate, schedule an appointment with a residential real estate attorney at Lee Scott Perres, P.C.