20) How to Invest in Real Estate for Beginners
Nowadays, there is a wider variety of real estate investment opportunities than ever before. This opportunity can make a first-time investment in the real estate industry overwhelming for new or seasoned investors. Let’s go over the 3 common types of real estate investments that beginner-level investors will encounter. We will also discuss the time and knowledge requirements for each investment method.
You have probably heard of a REIT (Real Estate Investment Trust) at one time or another, as they have recently risen in popularity through platforms like Fundrise. A REIT is a large trust that contains investment properties which produce revenue and is then redistributed as dividends to investors. There are several types of REITs, but all run on this basic concept which does not require investors to commit very much time or knowledge to the investment. Although this is one of the easier ways to invest in real estate, some REITs have withdrawal restrictions that make your investment illiquid. Therefore, while the returns are competitive, they are not as great as other investment methods.
Flipping Real Estate
There are plenty of examples of flipping in TV shows and all-over social media. It is a very attractive endeavor that advertises high returns but doesn’t advertise the increased knowledge and time commitment required. Investing this way involves a lot of time, money, willingness to learn how to be a general contractor, and many other things. Another thing people do not consider is the need to have a network of vetted subcontractors to carry out the work. Many investors don’t realize this method can become a full-time contracting and management job.
Real Estate Syndications
If you search the internet, you will find many real estate syndication companies (like ours) with various real estate offerings. These offerings require a low time commitment but a basic knowledge to invest confidently in these offerings. Investors should do their due diligence on their preferred syndicator and become knowledgeable on documents within the offering memorandum. These deals typically require investors to be accredited; however, there are some instances where being an accredited investor is not required. These investments usually offer higher returns than REITs and have similar liquidity in some cases.
There are many more ways to invest in real estate, but these are a few of the most common methods to start your real estate journey. Of course, everyone’s journey will take a different path and arrive at different destinations, but they all start with your first investment. As an investor, this can be the most daunting step. However, I would like to remind you that this is not a journey that you have to make by yourself. You can read our other articles and follow our social media platforms for exciting investment opportunities with Albany Park Capital.