It is normal that the first step of real estate investment is buying a home or a property and giving it out on rent or reselling it after the prices are favorable for sale. However, being a landlord is a tough job with a lot of giveaways. The best part is that you can invest in the realty sector without actually buying any property.
The drawbacks of being a landlord
Believe it or not, leasing out a house or a flat is not a fancy task. Even after buying a perfect property in a dream of a place and panoramic for the right tenants, there may be surprises in the offing. A landlord had to change the ceiling in a home he was to rent when an old radiator conked off. In another case, the doors got locked with the tenants outside and they needed the landlord’s spare key. Then there are tenants who simply stop paying rentals for a few months at a stretch. Taking the services of a property manager is a good idea and can alleviate the mental exhaustion, but at the same time it has a downside; it costs a chunk of your profits.
We have to remember that buying a premium piece of property comes along with a completely new pack of challenges. To get a mortgage from a conventional bank, one has to go through a pile of documentation. Investment real estate usually requires a 20 percent of down payment followed by the process to pinpoint and buy the appropriate property. All this can be a very exhaustive and time-taking process. Though, the financial advantages of giving your property on rent are many and usually tempting, the style of living element might prevent some from getting into it.
However, there are alternatives, let us see what they are:
Real estate investment trusts (REITs)
REITs are firms that are owners or financers of income-generating properties. All those who can buy shares in public limited REITs, similar to going in for any other stock. They can plough their capital in REITs by purchasing shares in a specific REIT straightaway via an open stock exchange, or through investment in Exchange-Traded Funds (ETFs) or mutual funds that are concerned with real estate.
While investing in REITs offers every benefit of leveraging on realty sector profits devoid of the altercations of repairing leaking toilets, resolving neighbor disagreements, or running after tenants for rents. The REITs take up all these jobs for you and take away a share of the profits in return for your investment.
REITs are also likely to get higher comprehensive outputs.
Real estate partnerships
In this situation, you could take help from a group of investors and other real estate professionals to handle undertakings under the banner of a liaison or restricted liability collaboration. The business group would buy property and hire a property manager to supervise the day-to-day functions.
This kind of a setup can operate well and facilitate investors in the making to avert the less attractive work abundant amongst landlords. Nevertheless, the framework should be built with specialist legal advice. A cooperative contract or documented operating processes should be specifically defined in terms of everyone’s participation and liabilities and commitments right from the start.
Peer-to-peer lending platforms
Peer-to-peer loaning stages permit investors to lend finances without the utilization of conventional financial organizations. However, characteristic P2P loans are often not bound to the parallel and that might stimulate some investors.
Rather, if you are keen for investment in real estate, consider ground floor, a basis that specifically serves realty investment. It blends the most lucrative benefits of peer-to-peer lending backed by the security of a hypothecated investment for non-acknowledged investors — people like us. It is estimated that their averaged annual returns hover around 10 percent. Loans are mainly short-term — between six and 12 months.
The domain of real estate-supported crowd-based sourcing is flourishing and transforming fast. As this category of investment gains maturity, more performers will probably come to light. There are autonomous associations of investors that rate and evaluate real estate crowd-based financing bases according to individual investment experience. These are very beneficial in reviewing and accessing before taking any investment steps.