Even in the midst of the COVID-19 pandemic, Americans were most likely to list real estate as the best long-term investment option.
In many ways, real estate is the prototypical long-term investment. It takes a good bit of money to get started, the commissions are quite high, and the returns often come from holding an asset for a long time and rarely over just a few years. Still, real estate is Americans’ favorite investment, according to a 2019 Bankrate study. Real estate can be an attractive investment, in part because you can borrow the bank’s money for most of the investment and then pay it back over time. That’s especially popular as interest rates sit near attractive lows. For those who want to be their own boss, owning a property gives them that opportunity, and there are numerous tax laws that benefit owners of property especially.
How do I get started in Real Estate Investing?
Without a huge initial chunk of capital, that can be difficult. Enter REITs (real estate investment trusts). REITs allow you to invest in real estate without the physical real estate. Often compared to mutual funds, they’re companies that own commercial real estate such as office buildings, retail spaces, apartments, and hotels. REITs tend to pay high dividends, which makes them a common investment in retirement. Investors who don’t need or want regular income can automatically reinvest those dividends to grow their investment further.
Have the cash to invest in a property or two? Think rental properties or flipping. House hacking is popular in 2020: an option that essentially means you’re occupying a portion of the investment property, renting out rooms, apartments, or units in a multi-unit building. This option allows investors to buy a property with up to four units and still qualify for a residential loan. Of course, you can also buy and rent out an entire investment property. Find one with combined expenses lower than the amount you can charge in rent. And if you don’t want to be the person who shows up with a toolbelt to fix a leak — or even the person who calls that person — you’ll also need to pay a property manager. Flipping is another enticing option for those with the capital to invest. your biggest risk with this investment is that the longer you hold the property, the less money you make because you’re paying a mortgage without bringing in any income. You can lower that risk by living in the house as you fix it up. This works as long as most of the updates are cosmetic and you don’t mind a little dust.
In the end, the continued interest in real estate is likely prompted in part by the fact that there are a substantial amount of options for every type of investor. If you’re looking to invest in real estate, working with an experienced investment-focused Realtor can help you make the best choice to build wealth in your current financial situation.
If you’re interested in real estate as an investment option, don’t forget to reach out to The Dallas-Fincham Real Estate Team!