Investing in Real Estate has a long history of generating solid returns and building wealth in the United States and around the world. It’s a cornerstone of the way that people can improve their financial position over the long run and set themselves and their families up for success. Millions of people aspire to save up enough money for a down payment to purchase a house and achieve the “home ownership” milestone that is entrenched in our society. It’s a fantastic goal to work toward purchasing a house and a critical way that people improve their financial position.
“Ninety percent of all millionaires become so through owning real estate.”Andrew Carnegie
After achieving the goal of home ownership, many people stop pursuing Real Estate as an investment. In fact, 91.3% of US workers don’t ever invest in properties outside their own home. This is a huge missed opportunity for most people, as Real Estate has a history of less volatility than the stock market, and better returns than alternative investments like Bonds/Notes from governments or corporations. Here are some of the best ways for you to get started in Real Estate Investing to expand your portfolio:
- Fractional Investing
It can be difficult for many people to afford an entire house or property, and even if you can it takes a tremendous amount of knowledge and experience to manage investment properties to achieve the highest possible return. Faced with these challenges, the Fractional Investing model was born. This allow people to invest in a portion of properties alongside many other people, and share in the returns and benefits of ownership. Usually these properties are managed by a professional property manager and no work is required by the individual investor – meaning its a true form of passive income. There are many different versions of this model, but Fundhomes focuses on short-term vacation rentals which are the hardest to manage properly, but receive the some of the highest returns of any type of Real Estate investment.
REITs or Real Estate Investment Trusts are a type of security on available to Accredited Investors who meet certain income thresholds or net worth’s. These are large scale pooled funds that purchase various forms of real estate properties and average the revenues of the properties together in order to provide investors a return. Although these forms of investment are very common and reasonably accessible, they do not offer the choice of specific properties to invest in, and they usually outsource property management which cuts into returns. On the positive side, they are resistant to decreases in value for individual investors because they average many properties together. They also provide a cash returns as well as equity return similar to Fractional Investments.
3. Private Partnership
Private partnerships is a way to buy property using friends, family, or other private investors that are willing to combine forces to purchase a property together. This a good way to increase your purchasing power while still maintaining a high level of equity in the property. Although you have more upside, you’ll also carry more risk. If an investment goes through a slump or you don’t have the proper expertise, then the investment can very easily start to lose money. On the other hand when things are going well, you reap all of the reward. This investment type is best for those who want to be hands on and involved in the various aspects of owning and running the property like a company.
4. Mutual Fund/ETF
Similar to REITs, Mutual Funds and ETFs pool money together from tons of investors to invest it in a diverse Real Estate portfolio. The main difference is that ETFs and Mutual Funds are more accessible and can be traded more similarly to stocks instead of buying into a private fund for accredited investors. These options have both limited risk and limited upside due to the nature of the diverse spread of investments – and the use of management fees and property managers can cut down on the overall return. They are a great way to diversify your portfolio and ensure you’re not too heavy in one particular asset class.
These are some of the main ways you can quickly get started in Real Estate, but make sure to do your own research before deciding which is best for you! Owning Real Estate is a time-tested way to build long term wealth an it’s important to stay up to date on how you can improve your financial position through these investments and others like stocks and bonds! Here at Fundhomes we are working to make this type of investing even more accessible to the everyday person by lowering the amount needed to get started, and diversifying risk to maximize returns and minimize losses for those who are new to the industry. Make sure to invest responsibly and do your research before making a decision to invest. It’s important to remember that sometimes investments lose value in unforeseen market conditions. Although Real Estate has traditionally been considered a safe investment, there have been declines in value during some recessions. Make sure to invest responsibly and do your research before deciding on any investment.