I can remember how nervous I was when I purchased my first home. I can also remember how much I stressed myself out with tons of research before purchasing additional real estate options. Have you ever thought about purchasing or investing in real estate? Do you find it difficult to save up the money and get started in real estate investing? Do you feel that this is unattainable for you? Well, there are many ways to get started in real estate investing with minimal cash and I am going to tell you how. One of the real estate investment options is even as simple as buying a share of stock.
Real Estate Investment Options
Investing in stocks, businesses, education, and other assets are a few ways to accumulate wealth with differing risk tolerance. The earlier you get started in investing to develop your financial health, the more time your investments have to grow from compound interests or improved skills year over year. Majority of wealth building experts highly recommend investing in real estate to build wealth and earn passive income. It is one of the most secure ways to become wealthy and break generational barriers when it comes to finances.
We often think of real estate investors as millionaires and billionaires with a prestigious background. In reality, you do not have to come from a wealthy family worth millions of dollars or be a celebrity to invest in and own real estate. Investing in real estate may seem like a scary process to get involved in, however it does not have to be difficult and expensive. In fact, there are many ways to purchase real estate, whether they are residential properties, commercial properties, or land, without breaking the bank and decreased risks. The various real estate investment options include the following:
- Commercial or Residential Investment Property
- Real Estate Investment Platforms
- REITs (Real Estate Investment Trusts)
Overview of Each Option
Commercial and residential investment properties typically are the riskiest of the options provided in the list above and often require a larger initial capital to acquire. The returns are often larger than the other options as well due to increased time and money invested in the management and maintaining of the property.
Investing in real estate requires a lesser initial capital than a commercial or residential investment property, however it can take years to see returns on your investment if you simply buy and hold the land. You would have to get creative with the land you buy, like turning it into a campground, in order to make money faster.
Real estate investment platforms, like Fundrise and Streitwise, are low-cost ways to enter the real estate market. These types of investing platforms usually have an investment minimum to get started which is normally $500-$1,000. Not only would you receive ownership of commercial and residential properties, but you would also receive dividend payouts on a monthly or quarterly basis.
Lastly, there is the option to purchase REITs in your investment account(s). REITs (Real Estate Investment Trusts) trade in the stock market, so you can purchase REITs like you would do for any other stock. REITs are also the simplest way to invest in real estate with minimal capital. Let’s dive deeper into REITs.
REITs – Real Estate Investment Trusts
As mentioned before REITs (Real Estate Investment Trusts) are traded in the stock exchange and provide a simple and quick option to enter the real estate market with lower initial capital compared to other real estate investment options.
What Exactly are REITs?
REITs are companies that own income-producing real estate and are located in every state across the United States. REITs include many types of commercial and residential properties like apartment buildings, hospitals, stores & shops, hotels, and many other types of buildings. For example, a popular REIT is Realty Income Corp, stock symbol “O”, and it trades for around $58.65 per share with a dividend yield of 3%-5%. This particular REIT includes well-known commercial tenants in its portfolio like Walgreens, Walmart, and Kroger.
You can literally have a piece of ownership of the buildings in which these companies operate which is exciting! The price per share may be shocking but REITs are often very low cost and can be included in your investment portfolio for additional diversification. Millions of Americans own REITs and reap the benefits of these dividend paying real estate investment options. REITs allow investors to have access to real estate that would typically cost an arm and a leg to purchase if they were purchasing the traditional investment property.
As with any other investments, make sure to do your research about the different types of REITs you are interested in and the performance of those REITs:
- Do they pay dividends monthly, quarterly, or annually?
- How much are the dividends per share?
- Are there new businesses opportunities?
- What are the industry trends?
For example, it is probably not ideal to purchase REITs that are heavily saturated with failing shopping plazas due to increased risk to your investment portfolio. Always conduct research first!
Pro Tip: Buy REITs in your Roth IRA to reap the tax benefits. When buying REITs and holding them in your Roth IRA, you can avoid paying income taxes on the dividends.
Hopefully this article was able to ease the stress and anxiety with jumping into the real estate market. Put aside any doubts you had about investing in real estate and get started no matter what route(s) you choose to take.
Cynquetta Dean, Girl Investment Group LLC