How to Invest in Real Estate


You might have heard that investing in real estate is passive, but that’s not true. You need to know the market and understand real estate. This article will explain how to invest in commercial real estate, REITs, rental properties, and house hacking. But before you jump in, you need to educate yourself. Below are four tips for a successful real estate investment. Knowledge is power. Here are some steps to get you started.

Investing in commercial real estate

Investing in commercial real estate is an excellent way to gain appreciation in the value of your money. This type of investment is a stable one and historically yields between 8 and 10 percent annual returns for U.S. investors. Unlike stocks, commercial real estate does not experience the ups and downs that often accompany these investments. Additionally, commercial real estate offers the potential of a hedge against inflation as property values usually increase at a lower rate than the price of goods and services.

Generally, investments in commercial real estate fall into six distinct sectors: office, retail, industrial, multifamily, hotel, and special purpose. Each sector exhibits different levels of risk and reward depending on market conditions, current tenant strength, lease renewal rates, and price. As such, it is critical to consider the risk and reward associated with different types of commercial real estate. However, there are some sectors that are better suited for investors who want to diversify their portfolios.

Investing in REITs

Investing in real estate trusts can help you preserve capital while diversifying your portfolio. REITs have relatively high payout ratios, but they also rely on raising debt and equity to finance their growth. The financial crisis wiped out many retirement accounts, making it difficult for many investors to get their hands on affordable capital. Additionally, while global interest rates remain near historical lows, many investors are still leery of rising interest rates. REITs are highly sensitive to changes in interest rates.

Some investors may be concerned that REITs don’t offer growth potential. But that is not the only worry when it comes to REITs. A higher interest rate can also increase the costs of competing properties, and REITs aren’t immune to this. Inflation can also hurt REITs. Rising rates will hurt their profits, and falling prices can hurt the stock. Rising prices will increase the costs of competing properties.

Investing in rental properties

Before you start investing in rental properties, you must be clear about your goals and the strategy you want to use. Many people make the mistake of not knowing exactly what they are looking for in an investment and end up giving up before they reach their goal. The reality is that this type of real estate investment is a complex one. While you may be tempted to buy a rental property at the first opportunity, the hard work involved will make you regret it.

Real estate has a long track record of steady growth, so you can benefit from its increasing value over time. Moreover, the rental income you receive will be passive and help you reduce your mortgage balance. When the time comes to sell your property, you can easily recoup your investment price and sell it for a profit. You can even choose the type of property you want to rent out – from residential homes to short-term vacation rentals – and decide the management style.

Investing in house hacking

Investing in house hacking is a great way to start out in real estate investing, but it’s not for everyone. If you’re looking to pay off your mortgage quickly, house hacking might not be for you. In addition to being a great way to make money, house hacking requires that you live in the property, which can affect your marriage, children’s school district, and sanity.

Investing in house hacking involves a considerable amount of work and is not for the faint of heart. In addition, you’ll need to live in the house yourself for at least two years to reap the benefits of house hacking. Finding a suitable property is key, as some HOAs prohibit non-owner occupancy. Other areas don’t allow short-term rentals. As a result, you may find a great deal, but it’ll be difficult to rent it out.