5 Simple Ways To Invest In Real Estate

Buying rental property is the oldest and most basic way to invest in real estate. The landowner charges enough rent to cover mortgages and other costs. Usually, the landlord charges only enough to cover the expenses until the mortgage is paid. At that point, most of the rent is profit.

Another way is through a real estate investment group, which is like small mutual funds for rental properties. A company buys or builds a group of apartments or condos, and then allows investors to buy them through the company, and thus join the group. One investor can own one or multiple units, but the company that operates the group manages the units in exchange for a part of the monthly rent.

Some traders buy properties with the intention of holding them for a short period of time, usually less than four months, and then selling them for a profit. Also called flipping, this technique requires buying undervalued real estate or operating in a hot market.

A real estate investment trust, a REIT, is created when a corporation or trust uses investor money to buy and operate income properties. REITS are bought and sold on major exchanges just like stocks. To maintain its REIT status, a corporation must pay out 90% of its taxable profits in the form of dividends.

And real estate gives investors leverage. Buying a stock typically requires paying the full value when you place the order. But many mortgages require as little as 5% down, enabling the owner to control the property and its equity by paying only a fraction of the value.

SOURCE: investopedia.com