Investing in Real Estate: Your Best Options to Generate Income

With the latest global events and the toll on the global economy, many people are turning to side hustles and becoming more frugal about their spending. And who can blame them really? 

If you’re looking to invest, real estate might be the right answer for you! We’ve put together some of the best ways and options to invest in real estate, and even laid out a few of the most common pros and cons to real estate investment. 

Consult your trusted financial expert and do your own research before making any decisions, but the following may give you a better idea of what is out there. 

Buying REITs

Real estate investment trusts (REITs) are sort of like the mutual funds of real estate and even compared to those funds most often. These trusts allow participants to invest in real estate without actually purchasing the physical building or real estate themselves.

REITs are companies that own commercial real estate like commercial retail spaces, apartments, office buildings, and even hotels. REITs are typically a common investment in retirement and they tend to pay high dividends. For the amateur investor, publicly traded REITs should be the route to take. These can be purchased through a brokerage firm and involve opening a brokerage account. While many companies do not require an initial investment, the REIT itself will likely have a minimum investment requirement. 

Other Real Estate Investments

Real estate investment groups (REIGs), real estate limited partnerships (RELPs), and real estate mutual funds are all additional investment options that require a little more research. Investors can also simply buy into a fund that holds shares of multiple REITs or invest in a real estate ETF (real estate mutual funds). For more on real estate ETFs and real estate investment groups, check out the links from NerdWallet and Investopedia. 

Invest in Rental Properties

This could be particularly lucrative if you are in an area, perhaps a college town, and just getting started in your own career or are simply single. Or maybe your oldest is heading off to college, and they need a place to live. You could purchase a 3-or 4-bedroom home, use one for yourself (or your student) and rent the others out. The key would be buying in an area where there’s always a need. That way, if you wanted to sell and moved on to another location, your home appreciation would have also increased and you’d make a profit on the sale. Or, maybe you stay there and take your earnings to buy another similar property. 

This does sign you up to be a landlord, so it is not the right option for everyone, but, under the right circumstances— and even better with renters that you know— it could be quite lucrative. 

Rent Out a Room

Because the DMV is such a transient area, you may even be able to rent out a room. Maybe your roommate has moved on or your kids are getting older. There are always people coming and going in the area. Military service members that are geo-bacheloring for a year or two, students in need from August to May, and various summer internship programs. Particularly if you have a separate entrance, you could list a room on AirBnb as well. That’s a great way to make some extra money without much effort or disruption to your normal day-to-day life. 

Flipping Houses or Apartments

We’re all guilty of watching those HGTV specials, finding a hidden gem that needs just a little extra TLC and some paint, and voila! Well, it isn’t as easy as the shows make it out to be, but, again, if you have the right skillset or even have friends who do, this could potentially become a big money maker for you. There is a lot more risk involved as you don’t always know what you’re getting into, but if you have some time and perhaps want to get your hands dirty, then this could be a great investment avenue for you!

Sometimes you may not even make the repairs. If you buy at the right time in an up-and-coming area or rapidly rising market, then you could hold the property for a while, resell, and still turn a profit. It depends on what the market does and you would weigh those options when the time comes.

Should You Take the Risk?

Again, this all depends on your current situation, how much money you have right now or assets that could be liquidated to invest, your risk tolerance, and more. Check out the lists of pros and cons below and then consult your favorite financial advisor before making any decisions!

Pros of Investing in Real Estate:

• generate cash flow

• value appreciates over time

• passive income

• tax advantages

• protection against inflation

• increases your leverage

• helps build generational wealth

• potential retirement home or vacation home

• typically less volatile than stocks

Cons of Investing in Real Estate:

• large upfront investment

• higher transaction costs

• more work— sometimes tons!

• no appreciation guarantees

The Bottom Line

Any investment is a risk. It is best to take stock (no pun intended) in your available funds, weigh your options and personal preferences, and then make a decision that fits you and your family best.

If we can help connect you to a broker, brokerage, or real estate investment group, please let us know. Happy investing!