How can those of all income levels add real estate to their investment portfolios? In today’s varied marketplace, there are plenty of options. In addition to shares of REITs (real estate investment trusts), people acquire ETFs (exchange-traded funds) and rental properties.
All come with pros and cons, so interested parties must do their research and avoid jumping in without understanding each of the methods. House flipping is an alternative tactic that appeals to many. Consider the following details to learn more about each approach.
REITs
REITs are sold in shares by many companies. Millions of working people who don’t have enough capital to purchase a house, office building, or rental property usually opt for REITs due to the accessible price point of the shares and the ability to purchase them from almost any brokerage firm.
However, like all financial decisions, people should research any REIT before acquiring shares. Some are better than others, and a few offers much higher potential returns. In the 2020s, these unique, low-cost assets have attracted attention from those who are wary of corporate equity stock shares and aren’t satisfied with the low rates of return on government bonds.
Along with investing in precious metals and commodities like oil, REITs are in a category that focuses on non-stock assets and has the potential to outperform the stock market during volatile economic times.
Rental Properties
For many real estate devotees, rental properties are the only way to go. These kinds of investors are attracted by the potential steady income of rentals and the concept of earning passive profits on their assets. But on top of that, those who put their money into rentals know that the properties can appreciate significantly with each passing year.
Rentals have the potential to pay significant returns if you know all the essential facts before getting involved in the market. Of course, they’ll be liable for a tax bill on the gain on sale of rental properties at some time in the future. That’s why it’s imperative for owners of rental properties to know all the potential tax implications that come with their investments.
Remember to review a brief guide to understand the role taxes play in the sale of any investment property, rental, or otherwise. It’s critical to weigh the potential profits against possible tax expenses on any asset you intend to acquire.
Flipping
It’s not fair to say that house flippers maintain extensive portfolios of property investments. But they do earn their primary income directly from acquiring, renovating, and reselling homes. Consider that a property flipper might hold several items in their portfolio at any given time, so there is an aspect of short-term investing to what they do, even if the term is sometimes just a few weeks in duration.
If you want to get involved in flipping as a part-time or full-time job, consider real estate business essentials and do plenty of research, target a first purchase that doesn’t need extensive work and get advice from people who are already in the business. Join local organizations and online discussion groups to learn as much as you can before plunking your hard-earned capital down on a fixer-upper home.
While flips can generate significant amounts of income per deal, it takes most about a year to learn the process and gain confidence in their newfound skills.
ETFs
Exchange-traded funds that invest exclusively in real estate assets are among the most popular ETFs in the current marketplace. Partly, that is due to the asset’s dual appeal. Not only do these unique instruments offer investors the chance to avoid a volatile stock market, but they also give people a low-cost way to gain a foothold in the property sector.
Like REITs, shares of ETFs are competitively priced and allow anyone a quick way to diversify an existing portfolio. It’s worth noting, however, that many build portfolios that contain property-backed ETFs exclusively. While that’s not the most cautious way of developing an ownership stake in a market, it is a fact that some investors combine their enthusiasm for ETFs with a love of real estate.
