Different Ways To Invest In Real Estate For The Novice

If you have just received some money from a settlement, lottery winnings, or an inheritance, you may wonder how to invest it wisely to give you some security. You may have heard that investing in real estate can be a good idea but don't know how. Even if your windfall is not a huge amount of money there are ways to get started in real estate with modest amounts.

Two Basic Paths

There are two basic routes to real estate investing, and the first way is through direct ownership and management of properties and assets. The second way is through indirect means where your property is managed by a professional entity.

Direct Ownership and Management

Directly investing in property is not for the faint hearted or lazy, and the risks involved will be all yours unless you recruit some other investors to go in with you. The first three are especially risky and you should be willing to put the time and effort into learning the business before diving in.

You may be interested in:

  • Flipping houses. In this method you purchase properties and do upgrades, then sell quickly for a profit.
  • Real estate speculation. You purchase a property with the idea that as time goes by it will become more valuable due to appreciation and business growth in the area.
  • Renting and managing properties. You buy houses and rental units and lease them out for steady income.
  • Finding other routes of cash flow income such as owning a car wash, leasing office space, or running a storage unit business, etc.
  • Running mini-businesses where you own and maintain vending machines with drinks/ food and place in workplaces, motels, or apartment buildings.
  • Maintaining laundry facilities is another example of this type of business.

Indirect Ownership

There are several ways to do real estate investing but eliminate some of the work and risk. You might enjoy purchasing properties to rent or lease and then have a real estate or other type of management company maintain them for you and collect the income. They would receive a percentage of the profits and send the rest to you on a regular basis. Office buildings, houses, and hotels/motels are types of real estate that can be managed by an separate entity.

Another way to make money is to invest in a real estate investment trust (REIT). This is an arrangement that is managed by an entity to buy/sell/rent out properties for profit while the ownership of the said properties are shared by a group of investors. Benefits of REITs are:

  • Risks are shared by investors.
  • The properties are maintained and managed by the trustee entity.
  • There are tax advantages.
  • You can invest smaller amounts than what would be needed in direct real estate ownership.

Just a reminder: before you invest any money in a real estate venture, be sure to do your homework to know what your responsibilities are, protect yourself as much as possible, and make sure the risks are worth the investment of your time and money. 

To learn more, contact a company like Jakob Pek Fund