The real estate investment market has opened up for small investors lately in a way that it hasn’t done in years. Activity by large, institutional investors with plenty of ready cash to spend has begun to quiet down, leaving the field open to regular folk attempting to make their first modest beginning.
Real estate investment trusts (REITs)
Not everyone who attempts to invest in real estate seeks direct ownership of a house. Real estate investment trusts (REITs) are investment destinations for real estate that act somewhat like mutual funds do for the stock market. These tend to be popular with first-time investors who are either unsure about how to go about buying and managing real estate, or do not have as much money as they would need to do so.
With REITs, you invest whatever money you are able to in a trust. The management of the trust takes your money to invest in real estate, speculating or otherwise making money to reward you on a regular basis. You don’t ever end up directly owning real estate any more than you would own stock directly if you invested in a mutual fund. If you are able to choose good REITs for your needs, they tend to be a hassle-free way to reap the benefits of real estate investing.
Getting into direct property ownership
Direct ownership of investment property usually means a life of rental management. You buy property, maintain it, and let it out to tenants for monthly payments of rent. According to Slater Hogg, a leading real estate agency (go to SlaterHogg.co.uk), being placed directly in control of everything from picking the right investment to finding tenants and fixing rent gives direct investors a feeling of control over the outcome.
If you are an investor who doesn’t mind getting his hands dirty working with the day-to-day challenges of managing property, and if you have an instinct for how real estate investing and management works, direct ownership can be a good way to go. If you are the direct ownership kind of investor, here are tips that can help.
It’s possible to start as young as 20
Unlike in the past, today, twentysomethings who have just started on a career are beginning to get into real estate investment buying duplexes and twin dwelling units. They let one unit out while they live in the other. Getting into such an investment tends to be a great strain not only because it can be hard to manage a mortgage on a home as large on a limited salary, but also because there are multiple areas of unfamiliar responsibility to get used to — managing one’s mortgage, managing ownership as well as learning the ropes as a landlord. As difficult a learning curve as it tends to be, many do manage the focus that it takes to ace it.
It’s important to plan far into the future
Many who start out in real estate investment today do so because the rental market seems promising — many cities suffer from a housing crunch which makes rental units easy to fill and profitable to let out.
The market may not remain favorable to landlords for much longer, though. A great many development projects are coming online today; over time, demand will be filled, and rent will fall. It’s important to make conservative estimates for what is possible over the long run.
It’s important to be careful with the way you price your rental units
First-time landlords often find that small families draw modest utility bills, and offer all-inclusive rental plans, where unlimited heat, water, telephone and Internet is included in a fixed rent. It can be hard to predict when a tenant may begin to use too much, though. If you forget that your original plan involved a small family, you may happily rent your home out to a bunch of university students or young workers who turn out to take long, hot showers and use many power-hungry devices.
It’s important to not get into speculation without experience
Speculative real estate investment, which is the kind of space that house flippers work in, may look easy on the outside. As homebuyers become better educated, though, they tend to be wary of flips. They are unlikely to pay a premium for homes that are not thoroughly fixed up with expensive repairs before they buy. These days, buyers also tend to ask deep questions about energy efficiency, code compliance and profit margins. Many buyers will refuse to buy a home unless they get to see permits for all work done. While speculative investing can certainly be profitable, it takes experience to do it right.
It’s important to not go and with a Lone Ranger attitude
First-time real estate investors tend to be excited about the investment path that they are on, and want to keep their moves close to the chest. While it can be exciting to do something on one’s own, though, real estate investing is complex, and one rarely gets it right the first few times. Mistakes tend to be far too expensive.
It’s important to learn, share and take advice. It’s the only way to succeed.
Julie Sanders has been buying and selling real estate for some time and is always pleased to share her ideas and insights with an online audience. She writes for a variety of different websites on a regular basis.