How to Invest in Real Estate Affordably

Most investment portfolios and retirement plans are invested in stocks and fixed-income investments. But real estate trumps all of these as it is an excellent portfolio diversification because of it being a “hard asset”. More so, the long-term investment performance of real estate is hard to argue with.

 

Adding some real estate to your portfolio can improve your investment returns over the long haul. Granted, real estate is a scary investment for a lot of people. And it can be if you only think in terms of owning a piece of property to rent out or to fix-and-flip.

 

But there’s many more ways to invest in real estate. And the great thing is there’s a way to invest in real estate which can work for anybody, even if you don’t have a ton to invest right now. So let’s say you’re having strong urges to invest in real estate but you just don’t have that huge chunk of cash that’s required, how can you invest on real estate, on a budget?

 

Here are some ways to get real estate investment cracking:

*Invest in Real Estate through Online P2P Platforms: * P2P investment platforms are springing up that are based on real estate investing. The process is commonly referred to as crowdfunding. That’s where groups of investors get together to pool money for specific real estate related investments. These platforms provide you with a way to invest in real estate online through different types of real estate, and in different ways.

 

With a P2P platform, you have more control over what it is you invest in and you can select the deals that you invest in. This also gives you an opportunity to diversify a relatively small amount of money across many different deals. Real estate-centred P2P crowdfunding platforms have only been around for a few years. But there’s already a wide variety of platforms that give you the opportunity to choose how and where you want to invest. Meanwhile, new platforms are coming online all the time. If you are not sure what is the best way to invest in real estate for you, these next options are definitely worth giving a quick Google search.

 

*Investing in Commercial Real Estate: *

This is a variation of rental property where you invest in office, retail or warehouse/storage property. It follows the same general pattern. You purchase a property and rent it out to tenants, who pay rent and hopefully generate a profit. Investing in commercial property is generally more complicated and expensive than investing in real estate rentals on the residential side of things.

 

So why invest in real estate at the commercial level?

Well, the principle of risk vs. reward determines that commercial properties are thereby more lucrative. Not knowing how to invest in property, especially on the commercial level, can be a very expensive learning curve. For someone with experience and capital, investing in commercial real estate is one of the best ways to invest in real estate because of the remarkable gains that can be made if done right.

On the plus side, commercial real estate usually involves long-term leases. Since the property is being rented to a business, they’ll want a multiyear lease. This will ensure the continuity of their business. A lease can easily be for a year or more. The cash flow will be steadier since you won’t be changing tenants every year or two.

Appreciation on the property can also be more generous than it is for residential. This is especially true if the property is producing large annual profits. That’s more likely to happen with commercial property.

On the downside, commercial property is often subject to the business cycle. During recessions, business revenues decline, and your tenant may have difficulty paying the rent. The tenant may even go out of business, leaving you with an empty building. Since commercial tenants come in all shapes and sizes, it may take months or years to find a new tenant for your property. Investing in commercial property is for more experienced investors who have a higher risk tolerance. It’s a true high risk/high reward investment.

Rent Out Space in Your Home or on Your Property: This is probably the easiest way to make money in real estate through direct participation. If you already own a home, you can pick up some extra income by renting out space. Think in terms of renting out a room or splitting their room in 2. If your house is located in the right area, and you have extra space, this is a pretty easy way to make extra money in real estate. Knowing where to invest in real estate is key to success in your real estate ventures.

Choose one or two – real estate is an excellent diversification in a long-term investment portfolio or retirement plan. There so many ways to do it, it’s just a matter of choosing the one you feel most comfortable with.