Did you know that the number of housing units occupied by renters in the U.S. is now 44 million?
When you recognize there’s more demand for housing than supply, you can appreciate that now is an opportune time to invest in apartments. But in addition to purchasing rental units and locating tenants, you can invest in the real estate market in other ways.
Here’s a look at three additional ways you could invest in real estate and earn a healthy return on your investment.
Residential Properties
Although rental properties tend to involve the highest cost of entry among the three items on this list, the potential financial returns are also ahead of the pack. If you buy rental properties, you will receive dependable monthly income, benefit from an appreciating asset, and have an option to make use of capital through leverage.
If you have the skills to renovate or remodel a structure, you can obtain rental properties at particularly attractive rates, fix them up, and then search for renters.
Owning and managing rental properties can be time-consuming, though, which is why some real estate investors opt to retain the services of a reputable rental property manager. The right company can help to market your rental units, screen tenants, collect rent, fill vacancies in a timely fashion, handle evictions, schedule repairs and maintenance, and provide customer service.
Thus, if you’d prefer to focus on looking for your next property rather than have to handle administrative tasks, it makes sense to get a third party to lend a hand.
Real Estate Investment Trusts
Do you want to invest in real estate without having to actually find a Realtor and purchase properties? An alternative is a real estate investment trust (REIT).
You can buy REIT units on stock exchanges. REITs focus on various segments of the economy, such as office buildings and malls, and they also pay out dividends to unitholders in order to maintain their REIT designation.
According to Statista, the U.S. REIT market added up to $1.25 trillion in market capitalization in 2021. And there’s no shortage of REITs to invest in.
Because REITs are basically dividend-issuing stocks, you’ll find this type of real estate investing to be highly liquid. So you can cash in easier than you can if you owned actual rental properties.
House Flipping
According to one source, the gross profit on a straightforward flip was up to $67,000 in the second quarter of 2021. Even so, the return on investment was down to 33.5% in the second quarter of last year versus 37% in the first quarter of 2021.
House flipping is arguably the most risky of the three real estate investment options we cite here. The key to success when you’re a house flipper is to unload properties at a profit within a relatively short time frame.
If you’re left holding onto a lot or building for too long, you’ll have to pay the mortgage on the property for longer than you might have planned. This could stretch your finances.
If you’re interested in getting into the real estate investment market, we’ve given you some options. Whether you want to buy rental properties, invest in REITs, flip homes, or find other real estate investment vehicles, the goal will always be to obtain tangible returns.
