Find out how to invest in real estate, as well as potential advantages and risks.
Investing in real estate is a long-established strategy to potentially help build wealth and generate income, and there’s more than one way to go about it.
You can invest in real estate directly by purchasing property yourself, or indirectly through pooled investment vehicles. These strategies are not for everyone, however. Based on your financial goals, we will help you evaluate whether and how to incorporate real estate investing into your financial strategy, including associated costs, taxes and risks.
Here are five common strategies to consider:
In this article:
- Publicly traded real estate investment trusts (REITs)
- Private real estate funds
- Long-term rental properties
- Short-term rental properties
- Purchasing, renovating and selling homes
- Questions to discuss with us
1. Publicly traded real estate investment trusts (REITs)
Traded REITs are public companies that invest in commercial real estate. Shares of these companies can be bought and sold on an exchange similar to other stocks. With REITs, you can earn a share of the income produced through commercial properties — such as apartments, office buildings, industrial warehouses or shopping centers — without purchasing the real estate yourself.
However, there are some potential downsides to be aware of, such as the potential for market volatility. Because these investments are publicly traded, they are more closely correlated with stock market fluctuations.
5. Purchasing, renovating and selling houses
If you have the time, resources and experience to renovate homes, house flipping may be a good strategy. It involves buying a home, renovating it to increase its value and then selling it for a profit — ideally within a short period.
However, flipping a home isn’t for the hands-off or risk-adverse investor. It requires the investor to have a strong understanding of the local real estate market, as well as solid project management skills and construction experience. Time is also a critical factor in earning a return: You’ll have to pay the mortgage and interest, property taxes, homeowners’ insurance and other holding costs for each month the project lasts.
Which real estate investment strategy makes sense for you?
Real estate can be a powerful tool to help build wealth and generate income. If you would like to discuss any of these potential strategies and how they may fit within your financial goals and your portfolio, reach out to us to discuss.