Real estate is a very high-ticket industry. In the US, a typical home has 3 bedrooms and 2 and a half bathrooms, totaling 1,800 square feet and carrying a price tag of $200,000. With such high prices, it’s easy to see why so many people invest in this industry and often see a good return. From flipping houses to renting out your properties, there are tons of ways to profit from the real estate market, but is now the best time to do so? In the US, the last big recession was back in 2008, so many worry that the next one is coming soon, thus holding back on making any investments.
However, real estate investing is a great way to both diversify your investment portfolio and make money. A study by Campden Wealth and UBS in 2017 showed that the ultra-wealthy invest around 15% of their total investment portfolio into real estate. Real estate is a great way to build your portfolio and income, with many people being able to live off of the income they make from rental properties.
With the rise of technology, real estate investing has been revolutionized and democratized. Passive real estate investing is booming. So should you start investing in real estate? And if so, how can you get a piece of the pie? Let’s dive in.
Is Now the Right Time?
Every corner you turn, you hear someone preaching that the recession is coming. For those with not much experience in investing, it can be scary to hear these predictions while you have money invested in the real estate market or are looking to get started.
It’s important to keep in mind that there’s always a recession coming. It’s essential to the way that the market works. Many homeowners have to endure multiple recessions throughout their lifetime, and many of them come out on top.
It’s important to be aware of the market conditions, but regardless of them, it’s even more important to see the value of the house you are looking at for what it is. If the house you are looking at is too expensive for what it’s worth, then it’s probably not going to be favorable for you. This also goes for houses that need a lot of work or aren’t in the best of areas. However, if you’re able to find a beautiful, lower-priced house, that won’t need many repairs and is in a great location, then chances are that your investment will be successful in the long run, regardless of what the market is doing.
However, owning a property isn’t for everyone. If you’re a handy-man or -woman who can take care of most issues with the house, then you might be all set. However if you don’t have any experience in fixing houses or knowing what’s wrong, you’ll have a difficult time. There are a lot of areas that can possibly be neglected if you don’t have the correct knowledge, and this could even harm residents’ health. For instance, dander, dust, and chemicals are recirculated in a home’s HVAC system between 5 and 7 times a day, with each circulation creating a small bit of build-up. Over time, this build-up grows, and can possibly harm the health of the residents that are currently living there. Something as small as cleaning out your HVAC system can easily be forgotten by those who are inexperienced and could have grave consequences on your residents and your income.
But if you want to be able to start investing in real estate, but don’t want to deal with homeownership, what can you do?
The Rise of Passive Investing
Enter passive investing. Passive real estate investing is when you invest your money to make more money while other people do the difficult work for you. While this might sound like a get rich quick scheme, it’s actually a great, sustainable business model that can be beneficial for all parties. First, you have money that you want to invest. You give this money to someone to manage your investment and make sure that you turn a profit. In turn, they receive a kickback from it.
Passive real estate investing is a great way to diversify your investment portfolio, especially to avoid fees and hassles of homeownership. Just to sell a house in the United States, it costs $15,200. With passive real estate investing, costs like that are either absorbed by the business you’re working with or spread out among many people. Since these companies have great cash flow, these fees have very little impact on your income.
Today, there are many great ways to get started. First, one of the easiest ways, is to participate in a crowdfunding platform. With this, a bunch of people pool their money together to invest in real estate, lowering the barrier to entry with low investment minimums. You could also invest in a real estate investment trust (REIT) which you can mainly trade on the stock market. This allows you to take share in the profit made from real estate investments made by other companies.
But if you still want to own an entire property, but not have to deal with managing it, there are other options for you. You could always invest in a turnkey property investing, or just hire a property management company to take over the management of your house.
Regardless of how you decide to invest in real estate, it’s essential that you start as soon as possible. As the old Chinese proverb goes, “the best time to plant a tree was 20 years ago. The second best time is now.”
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