Buying and owning real estate is an investment strategy that can be both satisfying and attractive. Prospective real estate owners, unlike stock and bond investors, can use leverage to buy a property by paying a portion of the total cost, then paying the balance over time, plus interest.
While a traditional mortgage usually requires a 20% to 25% down payment, in some cases a 5% down payment is all it takes to buy an entire property. This ability to control assets is signed on-the-moment papers, which give both real estate flippers and landlords who can take out a second mortgage on their homes to pay on additional properties.
Here are several ways investors can invest in real estate.
1. Be a Landlord
What it takes to start: Original capital needed to meet up-front maintenance costs and cover the empty months.
Pros: In addition, many associated expenses are tax-deductible, and any loss can offset gains in other investments.
Cons: Rental properties continue to suffer from constant headaches until you get a property management company. In the worst case, nuisance tenants can damage the property.
2. Real Estate Investment Group (REIG)
What it takes to get started: a capital flow and access to financing.
Pros: This is a much more ways approach to real estate that still provides income and appreciation.
Cons: There is a vacancy risk with Real Estate Investment Groups (REIGS), whether it extends to the entire group, or whether it is specific.
3. House Flipping
What it takes to get started: Capital and the ability to repair or oversee as needed.
Pros: There is a short period of flipping, during which capital and effort are tied into an asset.
Cons: Real estate trading requires in-depth market knowledge paired with luck.
4. Real Estate Investment Trust (REIT)
What it takes to start: Investment capital.
Pros: REITs are essentially dividend-paying stocks whose core holdings include commercial real estate with long-term, cash-producing leases.2.
Cons: REITs are essentially stocks, so leverage associated with traditional rental real estate does not apply.