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Becoming a real estate investor is one of the smartest things an individual investor can do. You can set yourself up with major, long-term cash flow with the right real estate property.
While all real estate opportunities are not created equal, the main investing ideas to look into are rental properties, commercial real estate, crowdfunding and real estate investment trusts (REITs). Understanding these real estate investment strategies is the first big step into setting yourself up for a prosperous future and an impressive portfolio.
Contents
- The 6 Best Real Estate Investing Strategies
- Invest in Rental Properties
- Invest in Multifamily Properties
- Invest in Commercial Real Estate
- Invest in REITs
- Invest in Real Estate Crowdfunding
- Invest in Vacation Rentals
- Invest in Rental Properties
- Best Real Estate Crowdfunding Platforms
- Benefits of Investing in Real Estate
- How Much Money Do You Need to Invest in Real Estate
- Habits of Successful Real Estate Investors
- Research Commercial Real Estate With Placer.ai
- Embark on Your Real Estate Investing Journey
- Frequently Asked Questions
The 6 Best Real Estate Investing Strategies
Using the most effective real estate investing strategies can help you build a real estate portfolio sooner. These are some of the strategies to use for your investing.
Invest in Rental Properties
Many investors first get their feet wet in real estate investing with a single-family rental property. Rental properties are easy enough to find in any real estate market. It’s important to know the real estate market and the area to score a good deal in a nice location. Renters pay more to be near shopping, great schools, quiet streets and updated living.
Once you secure your spot as a landlord, investing in more income-producing real estate will come easy. Speak with your lender about options to purchase another rental property with the excess income from your first investment.
Once you have a few rentals under your belt, you can either do the upkeep and maintenance yourself or hire a property management company to take care of things for you. This way you are the property owner collecting passive income each month from several rental properties while doing basically no other day-to-day maintenance.
Invest in Multifamily Properties
Investing in multifamily properties is a great way to get the most bang for your buck. Multifamily housing is any dwelling that houses more than one residence, where more than one family can reside. This list includes duplexes, small apartment buildings and condo complexes. Though they are more expensive and cost more money upfront, you have more tenants under one roof, each paying rent monthly.
With multifamily investing, you are responsible only for one property. One property to take care of instead of several single-family homes in multiple locations can be a driving force to opt for multifamily investing.
This type of real estate investing is also one that carries a low risk — with a cap rate ranging from 4% to 10%, depending on property value, operating expenses and asset class.
Invest in Commercial Real Estate
Commercial real estate is different from investing in residential real estate, as it’s on a much larger scale. Commercial real estate includes multifamily properties, office, industrial, mixed-use, retail, hotels and land. It can be difficult to come up with the funds for investing in commercial real estate, but the rewards can be great. In addition to a range of a 3% to 10% cap rate, commercial leases are commonly in favor of the owner.
Commercial real estate commonly uses a triple net lease — the tenant is responsible for base rent plus utilities, insurance, taxes and maintenance. The landlord or commercial investor assumes basically no costs and little risk with a common 5 to 10-year lease in contrast to a residential property where leases are generally one year with the landlord assuming a lot more responsibility.
Invest in REITs
Another way to pursue commercial investments is to invest in REITs. This investment strategy works well for a passive investor or someone who doesn’t want to deal directly with the lender, tenants, or properties. A REIT is a company that owns and operates income-producing real estate and rents it out to commercial tenants. An investor invests in the company and receives quarterly dividends based on their share of the income produced without owning real property.
This long-term investment, with low overall risk and competitive returns, as well as excellent capital appreciation and portfolio diversification can be a wise addition to your portfolio. Publicly traded REITs are professionally managed, with the goal of maximizing and building value long-term.
With the requirement that REITs distribute at least 90% of income to shareholders, most investment returns come from REIT dividends compared to typical stocks. Also, since it is open to non-accredited investors, investing in a REIT is an achievable investment opportunity.
Invest in Real Estate Crowdfunding
Real estate crowdfunding is a form of alternative financing that helps both accredited and non-accredited investors gain access to investment opportunities. Basically smaller amounts of money are raised by several individual investors to fund a real estate project.
Billions of dollars have been raised by crowdfunding, and you can access many real estate crowdfunding platforms, including CrowdStreet, Yieldstreet, EquityMultiple, RealCrowd and Streitwise — among others. It’s worth checking out a real estate crowdfunding site to explore what each platform offers and how they differ. It can be a great way to get into the world of investing with just a minimum investment to start.
Invest in Vacation Rentals
Vacation rental investments usually work out well. Not only do you purchase a vacation rental property in a beautiful location sought after by many, but you can charge more weekly for vacation rentals when in season and you have your own escape in the off-season.
When looking to invest in a vacation rental, it’s worth getting the best location and offering the best amenities. This way you can charge more — and get it. People are OK with spending more on their vacations if they are on the beach, steps from a major city or have a view of the ski trails. To maximize your investment, offer the vacation rental as a short-term rental in the off-season. This practice helps you to recoup money and keep up with maintenance.
Best Real Estate Crowdfunding Platforms
If you want to invest passively combining your money with other investors, crowdfunding is a relatively new but powerful tool. Look through the crowdfunding platforms here to begin your search.
Get Top Offerings
Arrived Homes is a real estate investment platform that focuses on building wealth through investing in rental properties. While most real estate platforms and REITs focus on commercial properties, Arrived Homes focuses on single-family homes as its source of rental income.
This focus on smaller properties allows Arrived Homes to sell ownership shares on individual real estate properties to non-accredited investors with buy-ins as low as $100. Learn more about Arrived Homes with Benzinga’s review.
- Small- to medium-sized investors
- Investors interested in rental income
- Investors looking to diversify
- Buy-ins as low as $100
- Open to non-accredited investors
- Offers ownership shares in real property (and all the tax benefits)
- Multiple ways to earn dividends (rental income and property appreciation)
- Great way to diversify portfolio
- Open to self-directed individual retirement accounts (IRAs)
- Long hold periods
- No secondary market to liquidate shares
Cityfunds are the first ever index-like fund for a single city’s residential real estate market. By investing in fractions of homeowner equity in top cities, Cityfunds has made it possible for everyone to own real estate in high-demand markets like Austin, Dallas, Miami, and Tampa for as little as $250.
CityVest is a web-based real estate investment platform that was established to give small-to-medium-sized investors access to real estate investment opportunities that typically require 6-figure minimum investments. CityVest does this by pooling multiple investor contributions into 1 bundle large enough to satisfy the minimum investment requirements of the best institutional private equity real estate investment funds.
- Individual investors seeking access to institutional investments
- Experienced investors looking to diversify their portfolio
- Investors seeking investments with strong due diligence and screening
- Access to high-performance institutional funds
- High returns
- Intense vetting of investment opportunities
- Third-party due diligence on all funds
- No registration needed to review investment opportunities
- Quarterly distributions
- Only available to accredited investors
- Not a lot of investor control of fund options
First National Realty Partners (FNRP) is a private equity firm that focuses on investing in high-traffic, grocery-anchored commercial real estate. FNRP employs a strict set of qualification criteria that investments must meet before they can be considered for inclusion in FNRP’s portfolio. The only deals you’ll see on the company’s platform have been well-vetted by professionals who have determined that the investment has potential. Though you’ll need to make a $50,000 initial investment to get started with FNRP, this amount is significantly lower than the amount you’d typically need investing in commercial real estate as a solo investor.
- Investors seeking a stable asset class to hedge portfolio against volatility
- Investors with long-term appreciation goals
- Investors seeking a fully passive investment opportunity
- Accredited investors looking for alternative investments
- Strong due diligence process
- Partners receive quarterly cash distributions
- 100% in-house investment process helps deals close quickly and secures more value and control for investments
- $50,000 minimum investment
- Accredited investors only
Fundrise is an online real estate investing platform with two clear aims: to simplify and democratize real estate investing. While there is no shortage of real estate investing platforms, Fundrise is one of the few that is open to non-accredited investors. Traditional real estate investing, and by extension most real estate crowdfunding platforms, require investors to pledge large amounts of capital. As opposed to the $25,000 to $50,000 investment minimums on many competing platforms, Fundrise distinguishes itself from the crowd by accepting investor contributions as low as $10.
The platform also has some of the highest quality real estate deals available. With a massive portfolio of institutional-quality properties, Fundrise investors can generate cash flow and long-term growth through a diverse portfolio of commercial real estate, multifamily properties, single-family rentals and ground-up developments.
- New real estate investors looking to get their feet wet
- Non-accredited investors
- Real estate investors who want a “set-it and forget it”-oriented option
- Investors looking for low-to-moderate cost buy-ins
- Multiple offerings available to non-accredited investors
- Simple menu of investment options
- Can use for IRA contributions
- Incredibly affordable buy-ins
- Low, easy-to-understand investor fee schedule
- Extended hold periods
- Limited secondary market
Benefits of Investing in Real Estate
The main benefit of investing in real estate is the extra income. As long as you are bringing in more money than you are putting out on the investment property each month, you are building a future for yourself: a retirement fund, a nest egg or an emergency fund. And if it eventually is too much to be a landlord or you want out of your REIT, you cash out.
If you’re in it for the long haul, the capital gains can grow substantially over time, and you will enjoy great tax benefits. Residential and commercial real estate investments come with many tax deductions — like costs to maintain and repair buildings, mortgage interest, insurance, legal and accounting fees, travel, office space and business equipment.
How Much Money Do You Need to Invest in Real Estate
You don’t need a lot of funds to get into real estate if you can tap into financing. You can take out an investment property loan to minimize your down payment but you must be mindful of profit margins. You can then invest in additional properties with the rental income.
Your passive income becomes your money for investing and increasing cash flow. Most crowdfunding platforms require a minimum investment of at least $1,000 up to $25,000. REITs, on the other hand, allow an investor to get started with the cost of a single share – ranging from $5 to $500. Anyone can become a successful investor — you just need to get started.
Habits of Successful Real Estate Investors
Successful real estate investors treat investing as their real estate business. It’s a job that needs to be taken seriously and handled professionally for the best results. Contact local real estate agents in the area you’re interested in and start making connections and asking for investment advice.
Competent real estate agents know the ins and outs of the area and the best locations to start, as well as competitive pricing in that real estate market.
Be sure to explore all investment opportunities and research ones that intrigue you. Residential or commercial real estate, REITs, vacation rentals and crowdfunding are all excellent ways to get started and see what works for you as an individual investor.
To become an effective real estate investor, get to know your market, make connections and treat it like a business. Then you will be on your way to becoming a successful entrepreneur and growing your real estate portfolio.
Research Commercial Real Estate With Placer.ai
AI has become a cornerstone of modern technological evolution with widespread adoption in numerous fields. In real estate investing, AI empowers commercial investors with predictive analytics to identify lucrative opportunities and optimize portfolio performance through data-driven decision-making. Placer.ai is a reliable and accessible market leader in location analytics, providing commercial real estate (CRE) investors and professionals unprecedented visibility into consumer movement. However, its application is not limited to real estate investing, but cuts across diverse sectors, including retail, shopping centers, brokerage firms, government agencies, finance and hospitality.
Placer.ai furnishes you with accurate data on who’s visiting your location and their origin. Its visitation trends generate comprehensive foot traffic and dwell-time metrics based on consumer groups and seasonality. By analyzing cross-shopping habits, Placer.ai allows you to understand your clients better and identify ideal co-tenants. You can obtain ranking metrics demonstrating the strength of any site location by category on a local, state or national level, track numerous businesses’ yearly performance and recovery and analyze foot traffic trends by sector and state across the country.
You can analyze top-performing brands in diverse categories for any state, city or zip code. Placer.ai’s dashboard delivers detailed insights about competitors and audiences, helping you discover new business opportunities. The platform can help you recognize the impacts of marketing, holidays and events on your company. Is Placer.ai the perfect location intelligence software to turbocharge your real estate investments? Find out from Benzinga’s comprehensive review of the platform.
- Commercial real estate investors seeking real estate intelligence software to gain deeper insights into foot traffic patterns, consumer demographics and competitive benchmarks, enabling informed decision-making and strategic planning for property investments
- Retailers seeking an AI-powered SaaS platform to understand customer behavior better, optimize store locations and enhance overall retail performance through insights into foot traffic and consumer trends
- Hospitality companies seeking an advanced location analytics SaaS solution to optimize the siting of hotels, restaurants and entertainment venues by understanding visitor trends, enhancing customer experience and driving business success
- Intuitive and user-friendly interface for easy accessibility
- Unlimited SaaS dashboard access with complete analytical suites
- Real-time foot traffic tracking, analysis and insight, including visits, timing and benchmarks
- True trade areas, demographics and customer journey analytics
- Customizable reports, data feeds and APIs
- No individual seat licenses — licensing is geared towards companies and team Available only for U.S.-based businesses
- Subscriptions are on a 12-month commitment basis
- Limited integration with third-party software
- Might require a learning curve
Using Placer.ai is as simple as searching for the city, state or ZIP code where you want to move, set up a business, etc. You can learn many things from the platform, including:
- Visitation trends
- Foot traffic figures
- Cross-shopping habits
- Co-tenant information
- Combined metrics using these figures and more
While you’re reviewing this information, you can decide where you want to open a new location, how stiff the competition is and the sort of customers you will find in that region, making each investment that much simpler.
Embark on Your Real Estate Investing Journey
Real estate investing can help you generate long-term wealth and steady cash flow from your assets. The investment is inflation-resistant and is a core component of many portfolios. Using the best strategies and staying focused on long-term goals can help you experience more success as an investor.
Frequently Asked Questions
What’s the most profitable investment in real estate?
Because of the high ROI and consistent cash flow, investing in an AirBnb or long-term rentals is one of the best real estate investments.
What’s the 2% rule in real estate?
The 2% rule in real estate says that the monthly rent you collect on a rental property should be no less than 2% of the purchase price.
What is the 10% rule in real estate?
The 10% rule in real estate says that you should only make a 10% down payment on a property.
The post Best Real Estate Investing Strategies by Megan Brown appeared first on Benzinga. Visit Benzinga to get more great content like this.