Are you interested in getting started with real estate investing but unsure where to begin? Are you looking for a way to generate income without the hassle of managing a property yourself? Whether you're new to the world of real estate or simply exploring new ways to diversify your portfolio, this blog will break down the basics and show you how to add real estate investments to your strategy with confidence.
How To Invest in Real Estate
Whether you prefer to purchase an investment property and manage it yourself or take a more hands-off approach by having someone else handle the work, there are real estate investment options to suit every preference. Real estate offers a variety of ways to diversify your portfolio, allowing you to tailor your investment strategy to your desired level of involvement.
What real estate investment opportunities are available to me?
Hands Off/Passive:
REITS: REITs, or Real Estate Investment Trusts, offer a hands-off way to invest in income-producing real estate such as apartments, office buildings, hotels, and retail centers. These trusts pool funds from multiple investors and generate returns through rental income or interest from financed properties. REITs typically provide average annual returns between 4% and 7% and offer liquidity similar to stocks or bonds, making them an appealing option for investors seeking passive exposure to real estate without the responsibilities of property management.
Trust Deed Note: A Trust Deed Note, or a Secured Promissory Note, will allow you to invest in a specific property or parcel and own a percentage of that property. Your ownership is listed on the deed of trust and recorded with the county. This is a great way to earn passive income and stay hands off!! Typically, there will be a loan servicer and lender involved. Some companies will outsource to service the loans, and others will service the loans in-house. Ignite Funding services the loans in-house, providing greater oversight and communication throughout the life of the investment. A deed of trust secures the promissory note, meaning that in the event of a default or foreclosure, the property can be claimed by the lender(s) listed on the deed. As a lender, you benefit from a more efficient and cost-effective foreclosure process. However, it's important to note that a trust deed note is not a liquid investment; your funds remain committed until the borrower repays the loan or the property is sold.
Hands On/Active
Investment Properties: Purchasing an investment property can bring both rewards and challenges. While it’s a great way to diversify your portfolio and generate rental income, owning a property also comes with responsibilities that can create stress for the owner. Many investors choose to hire a property manager to help handle day-to-day operations, but this service comes at an additional cost that can impact your overall returns. It’s especially important to consider these factors if the property is located in a different city or state from where you live, as managing a remote property can be more complicated and time-consuming. As the owner, you’ll be responsible for repairs, maintenance, and potentially covering the mortgage during vacancies. Don’t forget to budget for property insurance, taxes, and ongoing upkeep to ensure your investment remains profitable and well-maintained.
Is real estate investing right for you?
Whichever path you choose in real estate investing, it’s essential to conduct thorough research and due diligence before making any decisions. Real estate isn’t the perfect fit for everyone, but it can offer an excellent opportunity to generate income and diversify your portfolio. Success in real estate depends largely on your risk tolerance, financial goals, and investment timeline. To make sure your investment aligns with your overall strategy, consider consulting with a financial advisor who can help guide you toward the best choices for your unique situation.
