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Real estate is a lucrative investment opportunity that many institutional investors have been taking advantage of for many years. But borrowers-turned-retail investors are finding their stride in this asset class as well, leaving behind a stock market-only approach to engaging investment opportunities. With the collateral benefits and long-term growth rate constantly on the rise, real estate forms a core component of many portfolios and offers unique stability for your other investments to thrive.
Investing in real estate takes a lot of research and leg work, but the results speak for themselves. If you are willing to put in the work in order to find great properties to invest in, you can expect growing returns and a gradually increasing equity in a commodity that will only build value over the years ahead. Investing in real estate can be done easily, but in order to find success here, you will want to follow these three crucial steps.
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1. Start with the REIT marketplace.
A REIT (Real Estate Investment Trust) is a stock market commodity that trades in a manner similar to an ETF. You can purchase shares of a REIT fund with a minimal upfront investment and take advantage of the massively proportioned dividend payouts that each one typically sheds on a monthly or quarterly basis for its investors.
This is the best way to learn the market without the intense capital and time requirements that come along with a real property purchase. As well, real estate funds come in all shapes and sizes, so choosing the ones that most benefit your needs will take some research on your part — searching for “What is Yieldstreet” is a great way to get started on this journey. Yieldstreet offers a number of real estate funds and alternative investment options that include commercial and residential properties for a high volume dividend as well as enhanced security for long-term investors.
Instead of jumping headfirst into the deep end, you can wade in with the help of these commodities. This way, you can read the prospectus each time a new quarterly earnings report comes out, take advantage of the research provided by your chosen funds, and earn a healthy profit in the process.
A REIT is a wonderful investment vehicle because it can facilitate nuanced learning of the property market without the risks associated with a traditional property purchase. Because these are a type of stock commodity, REIT fund managers must allocate capital to a cross-section of assets according to an internalized set of rules that are set out by the management team before any purchasing or rebalancing is done.
This means that while an investment trust trades in real estate property assets, they do so in a contained environment that mitigates the majority of the risk that you might face out there on your own. By learning from these trading and allocation patterns you can focus on the types of properties in your own local market that fit into the asset types that are most likely to bring you a healthy return alongside mitigated risks.
2. Manage your personal finances.
The property market is unique in that real estate buyers are working with borrowed capital. This means that managing your own personal credit score is essential to keeping purchasing costs low. With an average credit score, you may be able to secure financing for your newest buy but may have to settle for a less than stellar interest rate on the mortgage loan.
John Foresi from Venterra Realty is a great source of information on this front. The Venterra CEO is a master of making your funding and credit work for you, and John Foresi or any other local realtor in your area can help you prune and trouble spots in your credit history as you approach a buying opportunity in the property market and prepare to become a borrower.
3. Forge relationships with local tradespeople.
Working to build relationships with the local service community in your area is the best way to reduce costs going forward. Working with the same plumber, roofing company, and general contractor year in and year out will help you secure their services promptly when your tenants face an issue in the home or require a major repair like a new roof.
In addition, many jobs — like the new roof that you will have to put on every 20 years or so — are done as cash on service contracts. This means that many landlords must maintain a high volume of free capital in order to tackle a surprise repair job if the need arises. However, building relationships with these service providers may give you access to a type of credit within their businesses.
Your roofer may take an IOU for a few weeks as he begins to procure the necessary materials to rebuild your home’s roof. This is a great way to improve your overall cash flow and may give you the ability to hold less cash at any one time, freeing up your reserves for other interest-bearing investment opportunities.
Real estate investments are a fantastic way to create long-term wealth, but make sure you enter into this new marketplace with a plan and background knowledge.