5 simple ways to invest in real estate are Buying rental property, real estate investment group, flipping and real estate investment trust.
Buying rental property.
Buying rental property is the oldest and most basic way to invest in real estate.
The land owner charges enough rent to cover mortages and other costs.
Usually, the landlord charges only enough to cover the expenses until the mortage is paid, at that point most of the rent is profit.
Real estate investment group.
Another way to invest in real estate is through the real estate investment group, which is like small mutual funds for rental properties.
A company buys or builds a group of apartments or condos, and then allows investors to buy them through the company and thus joins the group.
One investor can own one or multiple units, but the company that operates the group manages the units in exchange for a part of the monthly rent.
Some traders buy properties with the intention of holding them for a short period of time, usually less then four months, and then selling them for a profit.
Also called flipping, this technique requires buying undervalued real estate or operating in the hot market.
Real estate investment trust (REIT)
REIT is created when a corporation or trust uses investor money to buy and operate income properties. REITs are bought and sold on major exchanges just like stocks.
To maintain its REIT status a corporation must pay out 90% of it’s taxable profits in the form of dividends.
An real estate gives investors leverage.
Buying a stock typically requires paying the full value when you place the order, but many mortages require as little as 5% down payment.
That enables the owner to control the property and it’s equity by paying only a fraction of the value.