The stock market has lost all its gains for the year. We are still up over 6,000 points since the Trump election. Some are getting nervous, and have moved money out of stocks into bonds. However, real estate and hard assets are attractive now, if just for a way to diversify. How Much Money Do You need to Invest in Real Estate?
According to Investopedia, “Thanks to the continued mess in the housing market, prices on all types of real estate are getting lower and lower. Those low prices have made it easier for average people to add these assets to their investments.” And Gold stocks are as cheap now, relative to the price of Gold, as they were when Gold bottomed in 2001.
However, given the number of choices and ways to go about investing in the asset classes, finding out where to begin or how much capital one needs is a daunting task.
Real Estate Investment Trusts
First created in the 1960s as a way to allow regular retail investors to participate in the commercial real estate market, REITs are some of the cheapest and easiest options for adding real estate to a portfolio. These securities are traded on the major exchanges like stocks and invest in real estate directly, either through properties or through mortgage investment. Some REITs will invest specifically in one area of real estate or in one geographic location. In exchange for offering investors high-dividend distributions, REITs receive special tax considerations and offer a highly liquid method of investing in real estate.
More importantly, REITs provide one of the lowest starting capital cost options for getting into the asset class. Several major REITs offer dividend reinvestment plans (DRIPs). These plans can provide access to commercial real estate for as little as the cost of one share of stock with little in the way of fees. You can buy one share for less than $50 or multiple shares.
Real Estate Investment Groups
For those investors looking to own physical real estate directly, real estate investment groups (REIG) or private partnerships may be for you. At their core, REIGs allow
Investors to own property in a cost-effective way to enter the real estate market. Generally, real estate investment partnerships usually take an investment between $5,000 and $50,000.
Hard Money Loans
If you want to invest in real estate but don’t want to be involved in property management, a good way is to use money from your IRAs or 401ks to invest with a real estate investor. You provide a short-term loan to bring a house up to new homebuyer standards. When the house is sold, your short-term loan to the developer is paid off with interest of 8% to 12%.
Generally, real estate investors look for $20,000 to $50,000 in short-term loans.
Notes and Deeds
Notes and deeds can be far more profitable, and less stressful than buying for resale. Hard money lenders, individual investors, and community banks can auction-off or sell-off mortgage notes (the notes can be current or in various states of default).
Investors can bid on and purchase these notes and start receiving payments from the borrowers. You become the bank and service the loan yourself or hire a third-party servicing company that also deals with late pays.
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