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<\/a>Is real estate even a good investment?<\/h2>\n
The short answer: Yes, according to experts, real estate tends to be a good investment<\/a>,\u00a0 provided you\u2019re not trying to profit in the short term.<\/p>\n \u201cReal estate [investment] is over time,\u201d explains Mancuso. \u201cSo as long as you\u2019re holding onto it over time, it\u2019s a great investment.\u201d<\/p>\n She cautions that markets can change every six months, but over the longer term<\/a> \u2014\u00a0anywhere between three and 10 years or even longer \u2014\u00a0that\u2019s where most people make their real estate money.<\/p>\n According to Mancuso, buyers should focus on slow and steady appreciation over cashing in quickly.<\/p>\n \u201cI\u2019ve never had anyone that\u2019s bought a multi-family or a piece of property 10 years ago and said that it was a mistake,\u201d she shares.<\/p>\n \u201cOkay, but how does real estate stack up<\/a> against other types of investments?\u201d you might be wondering. Unfortunately, the answer to that question isn\u2019t so straightforward.<\/p>\n Each type of investment has its own unique pros and cons, and your bottom line can be affected by a range of economic factors, many outside your control.<\/p>\n Investing in stocks is volatile, though big risks can bring big rewards \u2014 if you get your timing just right<\/i>. Stocks also tend to be more liquid, so you can cash out when you need to access your money.<\/p>\n The downside to investing in stocks? You can lose all you\u2019ve invested in a flash, especially if you don\u2019t know what you\u2019re doing.<\/p>\n Real estate, on the other hand, is more of a slow burn, earning you money over time. And it\u2019s much harder to access any cash you\u2019ve invested unless you sell or refinance the property first.<\/p>\n So which investment path is right for you? Honestly, it depends! Each person\u2019s financial situation and goals are unique.<\/p>\n But one thing we can<\/i> say when it comes to investing your money: It\u2019s generally not<\/i> a good idea to put all your eggs in one basket, and it\u2019s always<\/i> a good idea to consult a trusted financial adviser before committing to anything.<\/p>\n Not quite convinced? Here are seven big reasons real estate makes a great investment if you approach it the right way.<\/p>\n Real estate is a physical, tangible asset that will always have some<\/i> value. There\u2019s a finite amount of property available, and owning that property means you have something of real value.<\/p>\n With stocks, your investment can evaporate into nothing overnight. With real estate, your property value can decrease, but it\u2019s unlikely to become entirely worthless.<\/p>\n In the U.S., homes tend to appreciate an average of 3.9% each year<\/a>, though that number can be higher or lower depending on the individual market and its conditions.<\/p>\n For buyers who are interested in purchasing a home to rent it out, there\u2019s even more good news: Single-family rental homes offer annual returns of roughly 9%<\/a>, a very strong number for any<\/i> investment.<\/p>\n Though note that larger market swings in either direction can and do<\/i> happen.<\/p>\n For example, during the Great Recession<\/a>, home prices fell 13.9%, leaving many homeowners underwater on their mortgages (in other words, owing more than the home is worth).<\/p>\n Another example that\u2019s far less disheartening? Between 2020 and 2021, U.S. homes appreciated a whopping 14.5%<\/a> thanks to high demand and one of the strongest seller\u2019s markets in history.<\/p>\n These swings are outside the norm, but they\u2019re something to keep in mind as you contemplate investing in real estate.<\/p>\n The bottom line: You can expect your real estate investment to appreciate over time, but you may need to ride out some unpredictable market swings in the meantime.<\/p>\n When you own a property, you can always increase its value with improvements<\/a> made over months and years.<\/p>\n Even simple tasks like painting, upgrading hardware and fixtures, and putting in energy efficient appliances can raise the value of your property.<\/p>\n As you pay off your mortgage, you gain equity (that\u2019s the portion of the home you own as opposed to what you still owe your lender) in your investment. This builds your wealth over time. And if you ever need to access that money down the road, you can leverage it through a home equity loan or line of credit.<\/p>\n Renting out a home can be a great way to earn passive income, as long as you price the rent smartly, take care of routine maintenance, and find someone trustworthy to help manage the property.<\/p>\n Property ownership comes with tax breaks. You can deduct the mortgage interest from your home, and even state and city property taxes (depending on your location). If you have an investment property, you can usually deduct the expenses and operating costs associated with renting it out.<\/p>\n Plus, capital gains taxes are lower on properties than they are on other investments, and you can often defer paying capital gains taxes if you reinvest the proceeds from the sale of one property into buying another.<\/p>\n Even if you\u2019re not ready to purchase an investment property or manage a rental, there are plenty of income-generating options available. Some allow you to get started with as little as $25. More on these lower-cost investments soon!<\/p>\n Whether you buy your own primary residence, purchase a multi-family home, or put your money in online investing platforms, acquiring wealth through real estate investing could be more accessible<\/a> than you think.<\/p>\n Here are seven ways to go about it<\/a>.<\/p>\n If you can qualify for the mortgage loan, a multi-family property can be a great way to invest<\/a> in real estate.<\/p>\n \u201cYou can actually have one side rented out, and they can pay a good amount of your mortgage,\u201d reveals Mancuso.<\/p>\n Some multi-family properties can have up to four units, increasing your revenue potential. Eventually, you may even be able to sell the units separately for an even bigger return on investment.<\/p>\n \u201cFor [investment] beginners, a lot of people have roommates,\u201d Mancuso shares.<\/p>\n \u201cIf you\u2019re looking to buy a single-family home, and you\u2019re up for a roommate, that might be a great idea to rent out a room to someone you know.\u201d<\/p><\/blockquote>\n This can help cover a portion of your mortgage, and perhaps even give you some much-needed company.<\/p>\n Have some extra space \u2014\u00a0maybe a finished basement, in-law suite, or bonus room with an attached bath? That square footage could be paying you in the form of a short-term rental.<\/p>\n Use sites like Airbnb<\/a> to list your space \u2014 the proceeds might be more than you realize, especially if you live near a popular tourist destination.<\/p>\n Short-term rentals can be a great income stream because they typically earn a higher nightly rate than what you\u2019d get for a longer-term rental.<\/p>\n However, Mancuso suggests living in the home for at least a year to feel things out before trying this strategy out. That will give you time to figure out the ebb and flow of life in your new home, and decide how (or if) you\u2019d like to proceed with your rental.<\/p>\n Maybe you don\u2019t want to deal with new guests constantly coming in and out of your home, but you\u2019re still interested in bringing in rental income. If that sounds like you, a longer-term rental might be the ticket.<\/p>\n Whether you decide to rent out a portion of your home, or the whole thing while you travel the country living out your dream of #vanlife, a longer-term rental can bring income stability and peace of mind.<\/p>\n Plus, you only have to worry about vetting one tenant, rather than new vacationers every few days.<\/p>\n If you\u2019re unsure of where to look for a property, Roofstock<\/a> pre-vets single-family investment rental homes for you, removing a lot of the risk and upfront work.<\/p>\n One caveat: If you do<\/i> plan to be on the road far away from your property, you\u2019ll likely need a property manager to help maintain the home and respond to the needs of your tenant while you\u2019re away.<\/p>\n Not sure if you\u2019re up for living with roommates or opening up your home to strangers? That\u2019s totally fair! One investment strategy you can take is to do nothing, also known as the buy-and-hold. That\u2019s when you keep a property for years and pay down the mortgage while it appreciates in value.<\/p>\n Okay, maybe we exaggerated a bit when we said you could do nothing<\/i>. You still need to maintain the property and make periodic improvements if you want to increase its value. If you actually do nothing and leave it to sit deteriorating for years, it\u2019s probably not going to be worth very much when you try to cash in on your investment.<\/p>\n Flipping sounds simple: You just buy a house, fix it up, and sell it for a profit, right?<\/p>\n Not exactly. While flipping can be a good way to make money investing in real estate, you really need to know what you\u2019re doing.<\/p>\n There\u2019s a whole science to flipping. Experienced investors run all kinds of calculations on properties before they make flip purchases. They look at a range of factors, including:<\/p>\n Most experienced investors won\u2019t spend more than around 70% of a home\u2019s ARV for a flip. That\u2019s because at a certain point, it\u2019s just not worth the time, energy, or expense if the profit margin isn\u2019t there.<\/p>\n Keep in mind that top investors have years of experience running these calculations, and it\u2019s going to be much more challenging for you to come up with realistic numbers.<\/p>\n Plus, even the pros get it wrong sometimes and make a poor bet on a flip. That may not be a big deal to an investor who buys hundreds of properties a year, but for a buyer who\u2019s banking their one big investment on a flip, the results can be devastating. All of that is to say, flips are a risky and complex business!<\/p>\n So should you try flipping? That depends on how much work you\u2019re willing to put in and who else you\u2019ve got on your flip team. At a bare minimum, Mancuso suggests enlisting the help of a top agent, a real estate attorney, and plenty of construction and trade experts to help with renovations.<\/p>\n On top of having the right team, you\u2019ll also need to know what to look for in a flip. Your agent can help you with this, but there are a few relevant factors to keep in mind: location, features, rooms, layout, home type and style, property size (larger properties cost most to landscape and maintain), the overall health of the local real estate market, and more.<\/p>\n You even need to think about the home\u2019s era \u2014\u00a0also known as when it was built \u2014\u00a0and the relative pros and cons of houses constructed at that time.<\/p>\n \u201cIf you\u2019re looking for flips, I always find the houses between the 1940s and 1960s are solid homes,\u201d Mancuso reveals. \u201cMechanically, everything\u2019s sound \u2014 the roof, the heating system, the windows. However, they might need to be updated with decor, stripping wallpaper, refinishing floors, and upgrading the kitchen.\u201d<\/p>\n She adds that there are plenty of ways to upgrade a kitchen that won\u2019t break the bank, including adding recessed lighting, a trendy backsplash, freshly painted cabinets and walls, updated hardware and fixtures, and new energy efficient appliances.<\/p>\n All of that is to say, flipping is not for the faint of heart. It\u2019s a tough business with slim margins, and it\u2019s typically best for those with a bit of experience under their belts.<\/p>\n Not ready to buy an investment property, or even a home? There are still ways to get started investing in real estate for as little as $500 (or sometimes even less!). Here\u2019s a brief, non-exhaustive list of ways you can dip your toes into real estate investing without purchasing a property:<\/p>\n You don\u2019t need to have millions in the bank<\/a> to invest in real estate. You can start with as little as $25!<\/p>\n Granted, you\u2019re not exactly going to get rich from a $25 investment, and that investment probably won\u2019t pay off overnight.<\/p>\n Whatever you invest now should be a number you\u2019re comfortable with. Let\u2019s look at a few different tiered levels of investment and talk about what\u2019s possible.<\/p>\n Those aforementioned online investing platforms<\/b>? They\u2019re a great way to start small. Many require an upfront investment of at least $500, but a few go all the way down to $25. Most promise returns of anywhere between 6% and 12% annually.<\/p>\n Of course, success isn\u2019t guaranteed. Investing in these platforms is akin to buying stocks, and you have no control over the outcome. Still, it\u2019s an attractive option for many brand-new investors because it doesn\u2019t require the upfront cost of buying an investment property.<\/p>\n The only problem? There are an overwhelming number of options, and it\u2019s hard to navigate their relative strengths and weaknesses. Thankfully, there\u2019s an app for that \u2014 BrickFunding<\/a> compares the merits of each investment platform to help you choose the best option for you.<\/p>\n If you\u2019re willing to invest a bit more, you could try real estate investment trusts, or REITs<\/b>. Basically, REITs purchase properties \u2014 they could be commercial or residential \u2014 and you invest in their property portfolio. Although you\u2019re dealing with real property, investing in REITS is similar to purchasing stocks.<\/p>\n If you want actual part ownership of a group of properties, try real estate investment groups<\/b>. They buy up or build groups of homes and sell them as rentals to investors. Then the investment group stays on to help manage the rentals and takes a cut of all future rents.<\/p>\n Have $5,000 to invest in real estate<\/a>? You\u2019ve got options!<\/p>\n At this investment level, you may be able to start thinking about actually buying a property, whether a single-family residence for yourself (with a room rented out!),\u00a0or a multi-family home, where you live in one unit and rent out the extra space.<\/p>\n If the home is your primary residence, you can typically get better terms on the mortgage:<\/p>\n If a multifamily or even a single-family home is out of your reach, Mancuso says a condo can be a great starter investment.<\/p>\n \u201cIt\u2019s really all about starting small,\u201d she insists. \u201cI\u2019ve seen a buyer start off small and they get a condo. That condo then turns into another purchase of a single-family home. They might keep that condo and rent it out because they\u2019ve paid it down.\u201d<\/p>\n Another perk of condos? Most of the exterior maintenance is covered by the COA<\/a> (a condo\u2019s version of an HOA), which is especially helpful when you\u2019re renting out a home. Just make sure to check your COA bylaws, because they often have rules about renting your unit out.<\/p>\n \u201cYou\u2019re able to rent that condo out for great money \u2014 more than what you\u2019re actually paying for the mortgage with these low interest rates \u2014 and you\u2019re ready to make your next move,\u201d Mancuso adds.<\/p>\n By now, you\u2019re thinking this real estate investment thing sounds great, and you\u2019re ready to get started. You\u2019ve got some ideas about where you could put your money, and you\u2019re feeling confident you can handle the commitment.<\/p>\n Great! Here\u2019s your simple three-step plan.<\/p>\n When it comes to real estate investing, having the right team<\/a> is everything<\/i>. Here are a few experts you\u2019ll want by your side:<\/p>\n Of course, if you\u2019re merely investing a couple bucks on an online investing platform, you probably don\u2019t need a massive real estate team at the ready (though it can never hurt to consult a trusted financial advisor).<\/p>\n Work with your team to create the perfect investment strategy.<\/p>\n Your real estate agent and financial advisor will be key players here. They\u2019ll help you figure out your best path to wealth-building for your unique circumstances.<\/p>\n For example, maybe you already work two jobs and can\u2019t be bothered to fix up and rent out a home. In that case, capital investments might work better. Conversely, if you\u2019ve got a good amount of cash saved and some time on your hands, you may be up for the challenge of a fixer-upper rental investment.<\/p>\n You\u2019ve done the work, studied your options, and you\u2019re ready to make your investment(s). Congratulations \u2014 you\u2019re now a real estate investor. Here\u2019s hoping the profits roll in!<\/p>\n One cool thing about real estate investing is there are always new ways you can grow and branch out.<\/p>\n If all of this hasn\u2019t convinced you that real estate investing can work<\/a> for real, everyday people, we don\u2019t know what will. But if you need a little more nudging, look no further than these real normal people\u2019s investment stories<\/a>.<\/p>\n Chris G. held onto a property, rented it through some rough financial circumstances, and came out the other side $48,000 richer for it.<\/p>\n Andre Albritton had a miss when he first invested in REITs, but recently had an investment that returned a solid 30%.<\/p>\n Elisa Covington started small with a fixer-upper she bought on a short sale, and leveraged that purchase into a small flipping empire. So far, she\u2019s flipped over 20 homes, and only lost money on one of them.<\/p>\nReal estate investing vs. other types of investing<\/h3>\n
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<\/a>7 top reasons why real estate is a good investment<\/h2>\n
1. Real estate is a tangible asset \u2026<\/h3>\n
2. \u2026 That typically increases in value over time<\/h3>\n
3. You can always add to a home\u2019s value<\/h3>\n
4. Equity is your friend<\/h3>\n
5. Earn passive income<\/h3>\n
6. Enjoy tax breaks<\/h3>\n
7. You don\u2019t need to invest much upfront<\/h3>\n
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<\/a>Top 7 ways to get started in real estate investing<\/h2>\n
1. Buy a multi-family property<\/h3>\n
2. Get a roommate<\/h3>\n
3. Try a short-term rental<\/h3>\n
4. Or perhaps a longer-term rental<\/h3>\n
5. The tried-and-true buy-and-hold<\/h3>\n
6. Are you up for flipping?<\/h3>\n
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7. Other types of investments<\/h3>\n
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<\/a>How much money do you need to invest in real estate?<\/h2>\n
$25 to $1,000<\/h3>\n
$1,000 to $5,000<\/h3>\n
$5,000 to $10,000<\/h3>\n
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$10,000 or more<\/h3>\n
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Dip your toes in with a condo<\/h4>\n
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<\/a>3 simple steps to get started<\/h2>\n
1. Find the right team<\/h3>\n
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2. Create your investment strategy<\/h3>\n
3. Make your move<\/h3>\n
Step up your game once you\u2019re more skilled<\/h3>\n
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How real people make money investing in real estate<\/h2>\n