Friday, May 27 2022

Meveryone is familiar with the concept of buying stocks. But real estate investing is a whole other world — and a world that many people haven’t yet plunged into.

The reality, however, is that invest in real estate is a great way to diversify your portfolio. If the stock market crashes, your real estate holdings could limit the extent of the drop in the value of your portfolio. At the same time, diversifying into real estate could lead to a world of wealth-building opportunities.

But if you’re getting into real estate, you need to know what you’re getting into. Here are a few things most people might not realize about real estate investing.

Image source: Getty Images.

1. You don’t have to spend a lot of time to become an owner

Buying income properties and keeping them for many years could make you very wealthy over time. Not only do homes tend to go up in value, but the rental income you receive could more than cover your costs of ownership, leaving you with steady annual profits.

However, at first glance, the idea of ​​becoming an owner can be far from attractive. But one thing you need to realize is that you don’t have to be an active owner if you don’t want to. Instead, you can hire a property manager and outsource most, if not all, of that work to another party.

If you hire a property manager, you won’t have to worry about things like lease renewals, snow removal, and repairs because you’ll be paying someone else to do that work for you. And if you follow this path, the properties you own could become a source of passive income in the truest sense of the word.

2. House flipping is not for the faint-hearted

Those TV shows you see where houses are knocked down on a shoestring budget? Things don’t always work so magically.

While house flip may seem like a good way to start investing in real estate, the reality is that it comes with a lot of risks. For one thing, your renovation budget could end up collapsing, which could reduce your profits or wipe them out entirely. Also, if you’re buying from a repairman in a saturated home market, you may have a hard time finding a buyer.

That’s not to say you can’t make money flipping houses. Proceed with caution instead – and consider pairing up with someone who’s already done it for your first round.

3. You can invest in real estate without owning

Each time you own real estate, you assume certain costs and risks. And these may not match your comfort level. But one thing you should know is that it is possible to invest in real estate without actually owning it. All you have to do is load REITs.

REITs, or real estate investment trusts, are corporations that own and operate different types of properties. Many REITs trade publicly, so you can buy and sell them the same way you would with stocks. And because REITs tend to pay above-average dividends, they’re a great way to generate stable income in your portfolio.

You may be new to the world of real estate investing – but that shouldn’t stop you from diving into it. Many people don’t really know what real estate investing really entails, but the more you read, the more opportunities you might uncover.

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