Top 5 Real Estate Investment Ideas

If you’ve been thinking of increasing your wealth, real estate investment is the best way to do it. Buying and owning a real estate property is both lucrative and satisfying. Prospective buyers get the leverage to pay an upfront cost initially and can pay off the balance and interest down the road.

Although a mortgage typically requires a 20-25% down payment, investors, in some cases, can also buy a property by paying just a 5% down payment. This encourages landlords and flippers to control the asset immediately when the deal is signed and, in turn, take out second mortgages on their properties to make down payments on other new properties.

Sounds lucrative? Well, if you, too, are interested in learning how to invest in real estate and increase your income, here we’ve shared five real estate investment ideas you can opt for.

Let’s get started:

Best Real Estate Investment Ideas

1.    Rental Properties

Do you have do-it-yourself (DIY) renovation skills? Are you patient enough to manage tenants? Well, if yes, then owning rental properties can be a great opportunity for you. This real estate investment provides a regular income and added monetary benefits during the time of property value appreciation.

However, this realtor strategy requires substantial capital to bear upfront maintenance costs and to cover months when there are no tenants.

Pros:

• Many tax-deductible associated expenses
• Maximizes capital through leverage

Cons:

• Property is always at the risk of damage by tenants
• Managing tenants can be difficult
• Reduced income from potential vacancies

2.    House Flipping

If you are already experienced in real estate valuation, renovation, and marketing, this is an ideal strategy for you. This strategy requires funds and the ability to do repairs as per the need. House flippers are different from traditional buy-and-rent landlords. They often look to sell the undervalued properties profitably they buy within six months.

Types of house flippers:

• Pure property flippers – Do not invest in improving properties. Hence, the property itself should have the intrinsic value required to turn into a profitable deal without any alterations.
• Other flippers – Make money by buying properties priced reasonably and adding value by renovating them. This is usually a long-term investment in which investors can afford to take one or two properties at a time.

Pros:

• Can offer faster returns
• Tied up capital for a shorter time

Cons

• Sudden market changes
• Requires intense market knowledge

3.    Real Estate Investment Groups (REIGs)

This strategy is a good option for those who want to own rental real estate without the need to manage it. However, in order to pursue this strategy, you will need access to financing and a capital cushion.

In simpler words, RIGs are just like mutual funds that invest in real estate rental properties. Typically, a company in a RIG group buys or builds a set of condos or apartment blocks. They, then allow investors to buy them through the company by joining the group.

It’s worth noting here that one investor can buy one or multiple units of independent living space. However, the company that operates the investment group manages all of the units collectively, including advertising vacancies, handling maintenance, and interviewing tenants. For all these maintenance tasks, the company charges a monthly rent.

Pros:

• Offers income and appreciation
• Less involvement than owning rentals

Cons:

• Fees similar to those linked with mutual funds
• Vacancy risks

4.    Online Real Estate Platforms

Such platforms are for those wanting to collaborate with others in investing in a bigger residential or commercial deal. Online real estate platforms are used to make investments, which is sometimes known as real estate crowdfunding.

This strategy requires investing capital, which is mostly less than what’s required to purchase properties wholly. These platforms link investors looking to finance projects with real estate developers.

Pros:

• Geographic diversification
• Can invest in single projects or multiple

Cons:

• Management charges
• Tend to be non-cash with lockup periods

5.    Investment Trusts (REITs)

This strategy is best for investors who want exposure to real estate without any traditional real estate transactions.

An investment trust is created when a corporation uses the money from the investors to buy and operate income properties. The investment trusts are purchased and sold on major exchanges, just like any other stock.

Further, a corporation must pay 90% of its taxable profits in the form of dividends to maintain its REIT status. This saves them from paying corporate income tax. However, a regular company will have to pay income tax on its profits and then can later decide if they would distribute their after-tax as dividends.

Pros:

• Major holdings tend to be cash-producing leases and long-term
• Primarily dividend-paying stocks

Cons:

• Benefits associated with a traditional rental realtor do not apply

The Final Say

Whether realtor investors use their properties to earn profits or to bide their time until the perfect opportunity comes, they can build a strong investment program. All they have to do is pay a relatively small part of the total value upfront of the property. Just like every other investment. Investing in real estate has its profit and potential, regardless of the market status.