Property Investment | How to invest in real estate in 2024 | Why Should I Add Real Estate to My Portfolio?

Property Investment

While looking for investment options, there are many choices for where to put your money. Some of the good investment options are Stocks, bonds, exchange-traded funds, mutual funds, and real estate, no matter what level of experience you have; at the beginning if you are looking for forex or cryptocurrency that may be too volatile, you can also go with that option if you are an experienced investor. It is totally up to you that which investment you are going to choose and all that matters is how much you get involved into that investment, and also how much money you have to start investment and how much risk you are comfortable taking on.

Property Investment is basically an investing your money in the properties, buildings, houses and units that seems easier to understand than many other forms of investments, but before that it is important to understand how investing in property works, to decide whether it's right for you or not. Unlike stock and bond investors, prospective real estate owners can use leverage to buy a property(those may be workspaces or some kind of buildings) by paying a portion of the total cost as a downpaymet, then paying off the balance, plus interest, over time. It is more of a safe investments as compared to another form of investments.

Here are five key factors from which investors can make money on real estate

Rental properies -

If you are fond of do it yourself(DIY) renovation skills and have a patience of handling a tanents, then this type of investment best fits for you. Rental properties requires a substantial amount of money to finance upfront militance costs if the property is vacant, otherwise you can earn the rents monthly and also you can sell your property when ever you want. In this kind of investment your earning is directed by the monthly rents and the plus point is the value of your assets i.e., the property increase as per the market value.

Pros
- Provides regular income and properties can appreciate
- Maximizes capital through leverage
- Many tax-deductible associated expenses
Cros
- Managing tenants can be tedious
- Potentially damage property from tenants
- Reduced income from potential vacancies

Real Estate Investment Groups (REIGs) -

REIGs are basically a small mutual funds that runs the rental properties. These are ideal for those people who wants to own rental real estate but don't want to run by themselves. In a typical real estate investment group, a company buys or builds and maintain a set of apartments blocks, buildings or condos, then allows the investors to purchase them through the company, thereby allowing then to joining the Real Estate Investment Groups.

In this a single investor can own one or multiple units of self-contained living area or blocks, but the company operating the investment group collectively manages all of the units, handling maintenance, advertising vacancies, and interviewing tenants on behalf of those investors. In exchange for conducting these management tasks, the investors have to share some percentage of their monthly rents. At the end, you'll receive some income even if your unit or block is empty, but there are some conditions applied ss long as the vacancy rate for the pooled units or blocks doesn’t spike too high, there should be enough to cover costs.

Pros
- More hands-off than owning rentals
- Provides income and appreciation
Cros
- Vacancy risks
- Fees similar to those associated with mutual funds
- Susceptible to unscrupulous managers

House Flipping -

House flipping refers to the proactive where investors buys or invest in the property and then further invest in the renovation of that property and then sell for the higher values. In this case investors generally hunts for the lower valued properties which are available below the market value they invest in renovations or repairs to increase their value, and then sell them at a higher price.

House flipping requires a huge capital and the ability to do, or oversee, repairs as needed. Flippers who are unable to swiftly sell a property may find themselves in a huge trouble because they typically don’t keep enough uncommitted cash on hand to pay the mortgage on a property over the long period of term. This can lead to continued, snowballing losses. There are another kind of flippers who makes money by buying reasonably priced properties or apartments and adding value to them by renovating them. This can be a longer-term investment for them, and investors may only be able to take on one or two properties at a time.

Pros
- Ties up capital for a shorter time period
- Can offer significant returns
Cros
- Requires a deeper market knowledge
- Hot markets cooling unexpectedly

Real Estate Investment Trusts (REITs) -

A REIT is created when a corporation (or trust) uses investor's money to buy and sell and operate income properties. REITs are bought and sold on the major exchanges and can be looked like the funds or any other stock. A corporation must payout 90% of its taxable profits in the form of dividends in order to maintain its REIT status. By doing this, REITs can escape from paying corporate income tax, whereas a regular company would have to pay tax on its profits and then have to decide whether or not to distribute its after-tax profits as dividends with the investments. More importantly, REITs are highly liquid because they are exchange-traded trusts and are regulated by SEBI. In other words, you won’t need a real estate agent and a title transfer to help you cash out your investment as it is as simple as with the stocks and mutual funds. In practice, REITs are a more formalized version of a real estate investment group as it does not includes the direct selling and buying.

Pros
- Essentially dividend-paying stocks
- Core holdings tend to be long-term, cash-producing assets
Cros
- Leverage associated with traditional rental real estate does not apply

Online Real Estate Platforms -

Real estate investing structures are for folks that need to sign up for others in investing in a bigger business or residential deal. The investment is made thru on line actual estate structures, which can be also known as actual estate crowdfunding. This nonetheless requires making an investment capital, even though less than what's required to buy properties outright. The fine actual estate crowdfunding structures can pool sources of traders looking for funding opportunities with different traders looking for financial backing for new or modern real property initiatives. Thereby providing you with the possibility of diversifying your investments with not a whole lot money.

Pros
- Can invest in single projects or portfolio of projects
- Geographic diversification
Cros
- Tend to be illiquid with lockup periods
- Management fees

Why Should I Add Real Estate to My Portfolio?

Real estate is a fundamental component of investment portfolios, acting as a buffer against the volatility of stock market returns, rising interest rates, and inflation. Real estate is a distinct asset class that many experts agree should be a part of a well-diversified portfolio. Income from long-term lease contracts can be a significant component of real estate returns at a time when investors are looking for yield. This is because real estate does not usually closely correlate with stocks, bonds, or commodities.