Are the huge costs of buying investment property too much for your budget? Worry not because you can actually invest in real estate without having to buy a property. Here are 7 ways to do it:
- Invest in Real Estate Investment Trusts (REITs)
REITs allow non-buyers to place a massive investment in income-producing properties. These are companies that own real estate such as office buildings, shopping malls, and hotels. Some can invest in mortgages or loans but these usually go to smaller commercial and residential real estate. Unlike other real estate companies, REITs do not focus on reselling properties. Instead, they develop and operate the properties themselves.
Investing in REITs is profitable because these offer high long-term dividend yields. They also reduce risk by having relatively little to no connections with other assets. This is a favorable option for retirees or retirement savers looking for steady and continuous income from a reliable source. Investors will also love to hear that REITs are required to distribute at least 90% of the taxable income to its shareholders.
- Invest in real estate mutual funds
If you want to invest not just in real estate but also in a variety of other financial instruments, mutual funds might be what you are looking for. A mutual fund is a professionally-managed collection of stocks, bonds, and other securities. Mutual fund investors each own a share of the mutual fund. They can buy or redeem these at the fund’s current net asset value (NAV), which is equal to the value of all of its securities divided by its number of shares.
By investing in mutual funds, you will be able to diversify your investments pooled in from different income streams. You can also choose the kind of mutual fund to invest in. This allows you to have a free hand in managing the level of risk you want to take with your investment. You must note that the higher the risk, the higher the rate of returns.
- Invest in Exchange-Traded Funds
Like mutual funds, ETFs are a collection of securities in a single fund. They also give you the chance to diversify your investments at relatively low costs.
The main difference between the two is that ETFs are traded intra-day instead of at the end of each day like mutual funds. If stock prices were to fall during the day, you would not have any control over this with mutual funds. With ETFs, however, you have the opportunity to buy or sell in the middle of the day.
Moreover, ETFs typically have lower expense ratios than mutual funds. While this is a worthwhile advantage, ETFs can also have higher trading costs. So make sure to look up the total costs for each before investing.
- Invest in real estate notes
Notes essentially act as promissory notes for payments like business loans, personal loans, and student loans. In real estate, they mainly refer to mortgage loans. By investing in these, you take on the role of a bank or lender who holds the mortgage loan while the borrower pays it off. They will then pay you back within a certain length of time with interest.
Getting into real estate note investing is a great way to get a passive and consistent stream of income. You get monthly payments like you would if you owned real estate, except that you would not have to deal with tenants or property maintenance.
- Invest in home construction companies
With limited inventory and a rising population, there is an ever-growing need for housing. Not only do home construction companies have to develop
new neighborhoods, but they also need to rehabilitate older ones. It is for this reason that the Chicago housing market, for example, has been experiencing an upward trend. Ripe opportunities like these are what make investing in construction an appealing idea.
Some of the top home construction companies to look into include PulteGroup Inc., MasTec Inc., and MDC Holdings Inc.
- Wholesale houses
Real estate wholesaling basically means selling properties for other people. The goal here is to find a buyer who is willing to pay a higher amount than the current best prospect of the seller. Whatever the difference in price goes to the wholesaler with no fixing up involved.
One of the best parts about all of this is that you do not have to put down any money into the operation. You also do not need to take any courses or get a real estate license to be a wholesaler. So if you are good with people and have a wide network of contacts in the industry, then this might be for you.
Want to know how to start investing in real estate in Chicago, IL? Learn all you need to know with our professional real estate team at 606 Brokers. Call us today at 773.870.5101.