5 Ways To Invest In Real Estate

Invest in real estate with South Bend Invest - REO investment properties

Easy Ways to Invest In Real Estate

To some people, buying real estate is nothing more than just finding a place to call home. However, it is really so much more than that. In fact, investing in real estate is something that has become increasingly more popular over the last fifty years. While it is true that there are a lot of opportunities for individuals to make big gains when buying and owning real estate, it is important to realize that it is a lot more complicated than just investing in traditional stocks and bonds.

It is important to note that there are actually several types of real estate investments. These types include: investing in rental real estate, real estate investment groups, real estate trading, real estate investment trusts (also known as REIT), and self-directed IRA. Let us take a look at some of the ways a person, group, or trust could invest in real estate property and the complexity of each.

Rental Property Investments

Investing in real estate for the purpose of renting to a tenant is a practice that is as old as landownership itself. The owner (also known as the landlord) will be responsible for paying the mortgage, taxes, and any other costs or fees needed in order to maintain the property. The end goal, as a landlord, is to be able to charge a high enough rent to cover all of these costs. Most landlords also want to be able to make some sort of profit as well.

However, it is more common for a landlord to just charge enough to cover the fees. Once some of the fees (such as the mortgage) have been completely paid off – the vast majority of the rent the tenant pays turns into profit. In the end this is also going to leave the landlord with a much more valuable asset once the mortgage has been paid off completely.

Of course, it is important to realize that with everything good, there are going to be blemishes as well.

For example, you could end up renting to a bad tenant who ends up doing a lot of damage to the piece of real estate you are trying to rent. Even worse, you could end up not being able to find a tenant at all. If either of these occurs, you would fall into negative cash flow and may end up struggling to pay your mortgage. Furthermore, the location of the real estate is extremely important. You cannot just invest in property anywhere because the price is right. You have to invest in real estate property in a good area that people are going to want to rent in or close to a location like a popular college.

Source: In-House Experience

Real Estate Investment Groups

If you are wanting to own physical investment properties at wholesale prices you can build or buy a group of properties via a Real Estate Investment Group, like South Bend Invest, [who typically find REO properties at 30% to 40% below what is owed on them]. Once you acquire these properties, the Real Estate Investment Group hires a property management company to find tenants, handle maintenance and other responsibilities for you. The real estate investment group receives a portion of the investors’ monthly rent proceeds for this service.

These groups provide a service for rental properties that is similar to mutual funds in that investors can reap some of the benefits of owning rental properties without having to manage them. The challenge when you invest in real estate property with a real estate investment group is finding the right investment partner and doing your research on cash-flow properties together.

Source: Investopedia

Real Estate Investment Property Swapping

The deteriorating real-estate market (circa 2006) has led many to realize that trading may be an extremely viable approach to selling one’s real estate. This approach only works if the seller is also looking to buy another property, such as a move or relocation. But it is possible to move up or down in price, size, etc., or even trade to another city or state entirely. In some cases, you can invest in real estate property at a reduced rate and collect cash on closing.

As you might imagine, the complicity is the paperwork and factors within each of the state laws. We recommend you speak with a real estate lawyer if you are going invest in real estate property via the swap / trade. If you decide to go at real estate trading alone we suggest you use a site like Go Swap.

Source: Bankrate

Real Estate Investment Trusts (also known as REIT)

A real estate investment trust (“REIT”), generally, is a company that owns – and typically operates – income-producing real estate or real estate-related assets.  REITs provide a way for individual investors to earn a share of the income produced through commercial real estate ownership – without actually having to go out and buy commercial real estate.  The income-producing real estate assets owned by a REIT may include office buildings, shopping malls, apartments, hotels, resorts, self-storage facilities, warehouses, and mortgages or loans.

Most REITs specialize in a single type of real estate – for example, apartment communities.  There are retail REITs, office REITs, residential REITs, healthcare REITs, and industrial REITs, to name a few.  What distinguishes REITs from other real estate companies is that a REIT must acquire and develop its real estate properties primarily to operate them as part of its own investment portfolio, as opposed to reselling those properties after they have been developed.

The qualifications needed for a REIT are quite complex.

Source: Read more about how to invest in real estate via REIT directly from the U.S. Securities and Exchange Commission.

Investing in Real Estate for Retirement via a Self-directed IRA

With a self-directed IRA from a company like Midland, you get true freedom and control of your retirement investments. It is not a type of IRA, but a little-known way to invest in real estate property through your IRA.

Self-direction allows the investor to expand their portfolio beyond the typical stocks and bonds available with most IRA companies. You’re actually allowed to choose a wider variety of assets such as real estate, notes, private placements, precious metals, energy and more. The complexity of investing in real estate property via a self-directed IRA are the IRS rules …

Source: Internal Revenue Service

So, what is the best way to invest in real estate?

Ultimately it depends on the individual investor and their adversity to risk. That said, I love the way Gregory Zuckerman of the Wall Street Journal addresses this question … “But for an investor who understands their local market, is willing to do the research, is patient enough to get a great buy and has the skill set to perform the necessary and ongoing maintenance, hard real-estate investments will prove to be more profitable” than soft ones.

Source: Wall Street Journal

Concluding remarks about Real Estate Property Investments

Within these different types of ways to invest in real estate property there are countless variations. The most important thing for an individual to remember is that an investment in real estate is a lot like gambling. There is no guarantee that you are going to profit or invest in an assured gain. However, with the right strategy and insightful research you could hedge your bets.

If you are interested in investing more time into learning about anything written here:

South Bend Investment Properties - REO property investment - Invest in Real estate

Download your Free report on the 5 ways to invest in real invest and the trends surrounding each type. Compliments of South Bend Invest

Download your Free report on the 5 ways to invest in real invest and the trends surrounding each type. Compliments of South Bend Invest.

You may also, comment below, ask us via social media, or email me at John.Tiffany (at) SouthBendInvest (dot) com, and if we can help we will.

If we can’t help you will direct you to the appropriate resource or agency.

Note:  SouthBendInvest.com, neither John Tiffany are lawyers, nor Financial Advisors/Advisers. Please view our disclaimer.

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