There’s a wide range of ways to invest in real estate, from taking out a mortgage to
building a property empire that spans the country. The best way to add real estate
to your portfolio depends on your unique goals, and the type of property you’re
Many new investors focus on residential properties. That’s understandable — houses
are everywhere, found from the smallest towns to the largest urban areas. And
buying a single-family home, with its traditional mortgage, is relatively affordable,
especially for first-time buyers thanks to government support for the mortgage
market generally and programs that help aspiring homeowners buy a house with
little or no money down. Also read https://www.modernpropertysolutions.com/
But the reality is that residential rental properties are a small part of the larger real
estate investment market. Many investors who successfully turn real estate into a
source of passive income do so through commercial properties, which include
everything that isn’t a single-family home or duplex. Commercial real estate is more
specialized, and requires more time to research and manage. But for those who have
the patience and capital to do it, commercial investments can offer lucrative returns.
The key to success in any type of real estate investing is to have a solid plan. This
means knowing how much you’re willing to put into a project, understanding your
costs — including property taxes and homeowner’s insurance, as well as the time
you’ll spend managing the property. Too often, newcomers to real estate investment
are shocked by the amount of work it takes to keep up a property and make it
Effective real estate investors also know their markets inside and out. They look at
demographics, the availability of jobs and other factors that affect demand for
housing, as well as broader economic trends, to recognize when a market is
approaching a peak or a bust.
This knowledge should inform their approach to the real estate market, whether it’s
buying a rental property at the bottom of a cycle, or renovating a property in an upand-
coming neighborhood to sell when prices rise. They should also keep an eye on
construction to spot when new supply is overtaking demand and lead to a temporary
oversupply that depresses prices for a while until demand catches up again.
If you’re not ready to commit the time and money required for direct property
ownership, there are options that can offer exposure to the real estate market
without the headaches of landlording a physical property. One popular option is a
REIT, which invests in real estate companies that own and operate properties. You
can find REITs through your brokerage account and buy them like any other stock.
Another option is to invest in a crowdfunding platform that connects you directly
with real estate projects.
Regardless of how you choose to invest in real estate, be sure to consult your
financial advisor to ensure that the addition will advance your long-term goals. As a
general rule of thumb, you should only devote 5% to 10% of your portfolio to
alternative assets, such as real estate, so that you still have enough room for more
traditional investments that can provide growth and diversification.