To build personal wealth, many people seek to diversify their investment portfolios with assets like stocks, bonds, CDs, MMA’s, and others. While this is a perfectly valid approach to investing, in order to truly diversify your portfolio and any fluctuating market conditions, real estate is an important option to consider.
However, this doesn’t mean that you have to buy physical property. There are many ways to invest in real estate online, even if you don’t have a lot of money to work with.
How to Prepare to Invest in Real Estate
Before jumping right in, you want to figure out your investment goals. Think about the following factors:
How much do you want for the investment?
How long do you plan to hold the investment?
How “liquid” does your funds need to be?
What is your risk/reward tolerance? (e.g., do you want to take on more risk for a higher potential rate of return)
What type of property do you want to invest in?
Another important factor to consider is the fee structure and terms for the real estate investment. Fees and terms run the entire gamut, as you may find low-risk ventures with lower fees while some investments have high returns, higher risk and fees, and strict terms.
Figuring out these simple answers may help you home in on the type of investment vehicles that most interest you. You may be someone who would rather take a hands-off approach and fund real estate projects or real estate REITs, or you may want to purchase debt to receive interest payments from the borrower.
Why Start Passive Real Estate Investing Online?
Once you’ve decided to add real estate investing to your portfolio, there are a number of benefits to doing so online. You have access to more real estate investment opportunities, your access is more convenient, and the opportunities can be more diverse. Let's cover these advantages in more detail.
Passive Income
Investing in real estate online offers a way to get passive income without requiring you to actually find, inspect, evaluate, purchase and manage a property. It eliminates the headaches of tasks like paying property expenses, managing building upkeep, collecting rent, handling tenants, and financing and closing on new properties. Let the experts do what they're good at - while your investment grows in value!
Investment Diversity
Diversify your portfolio in numerous ways to obtain more stable returns. Rather than investing all your savings in just a few properties, you can attain greater diversity and stability by owning fractions in many assets--commercial, residential, and industrial.
Convenience & Access
You can manage opportunities from a laptop or smartphone without having to visit the actual property, so you aren't limited to real estate just in your nearby region. Online real estate investments allow you to quickly and easily get involved with properties around the world.
As with any investment, there are risks, which depend on the investment option, fees, and terms. Also, while these opportunities are pretty straightforward, others can get tricky and complex depending on the venture, so you need to determine the amount of time and work you have available while having sufficient knowledge to make informed choices.
5 ways to invest in real estate online with as little as $1,000
You can find several different types of online real estate investments. Each option varies depending on the type of investment, the kind or returns you can expect, the minimum investment amount, the length of the investment period and the types of properties or real estate funds you can invest in.
REITS
Real estate investment trusts (REITs) are companies that do all the property purchases, as well as handle the management and selling of the properties. They are modeled after mutual funds. REITs pool the capital of numerous investors who can gain profits from the revenue that is generated. REITs may involve a wide range of different properties, such as commercial high rises, shopping malls, apartment buildings, hotels, warehouses, or retail spaces.
REITs often focus on several related pieces of property, such as 10 strip malls or shopping malls. REIT shares may also be public or private. You are able to diversify with a portfolio of properties and obtain tax benefits as there is no federal income tax on any of the corporate earnings. Instead, roughly 90% of the profits are distributed as dividends to the shareholders.
REIT ETFs and Mutual Funds
Both REIT exchange-traded funds (ETFs) and mutual funds have a few similarities. They allow you to invest in them at low costs as there is a broad range of funds for the diversification of portfolios. Here are the key differences between these funds.
Real Estate ETFs
REIT ETFs are funds issued by real estate investment trusts as they purchase all types of properties. The fund itself has several stocks and bonds involved. When you invest in the REIT ETF, you get dividends from a portfolio of REITs. This arrangement helps to lower your risks as you are not limited to specific or particular markets. Within the ETF, the REITs could have a broad range of properties, as each ETF may focus on a specific type of real estate.
Real Estate Mutual Funds
A real estate mutual fund consists of mainly securities such as stocks. You will invest into the fund and the fund manager reinvests into a range of real estate opportunities such as REITS, property management companies, firms selling real estate, and many others. It is a way to be hands-off when investing in online real estate. Real estate mutual funds may also consist of a portfolio with a range of shares.
Real Estate Mortgage Notes
Real estate notes involve purchasing mortgages that are either non-performing or performing. These are debts that the borrower is paying to own real estate property. You purchase the debt from the bank at very low prices and then collect on the payments or settlement. If the note is performing, it means that the borrower is actively paying off the mortgage and sending you the payments. If the note is non-performing, the borrower is in debt and the loan will need to be settled. Then you can foreclose and try to sell the property for profit.
Online Real Estate Property Marketplaces
There are also online real estate marketplaces such as Crowdstreet, as well as a number of real estate crowdfunding type platforms that allow investors to connect with real estate developers who are looking for funding for their projects.
Platforms that connect real estate development investment opportunities offer properties in various phases of development and different types of real estate, such as an apartment complex community or large industrial park. After the project is completed, you obtain your share of the profits and/or rental income.
Other investment opportunities on these sites include REITs and real estate related products.
Most online real estate marketplaces require that the investor be accredited. Others may require you to create an account and make a minimum investment. The money you invest into the project is managed by the real estate team.
Hard Money Real Estate Loans
In cases where you may have more than $1,000 on hand, you may get into the hard money loan opportunity. This option involves loaning money to an investor who will then invest that money into other ventures. Just like traditional bank loans, a hard money loan has specific term limits and will have a specified rate of interest. It is common for there to be a balloon payment at the end of the loan term.
Conclusion
Investing in real estate does not have to be a complex venture. For many opportunities, you do not even need to have a large starting investment or own property to get involved in the market.
EquityBrix can help you grow your wealth through our fractional real estate investment platform. Our team marries the needs of investors and real estate developers by providing opportunities for above-market returns. EquityBrix is committed to creating high-yield investment offerings, and we can help guide you through the new era of real estate investing.
If you want more information about tokenized real estate investing go to EquityBrix or EquityBrix.com/Learn.
If you are looking to grow your wealth and diversify your investment portfolio by learning about innovative ways of investing in real estate go to EquityBrix, or contact us for more information, or sign-up for the EquityBrix Newsletter.
*Disclaimer: EquityBrix is not an investment adviser. This information is for educational purposes only and does not constitute investment or tax advice. It’s important to be informed and to make your own investment decisions or do so in consultation with a professional financial advisor. Under no circumstances should this material be used or considered as an offer to sell or a solicitation of any offer to buy an interest in any investment. Any such offer or solicitation will be made only by means of a written online prospectus relating to the particular investment.
Can I invest in real estate online?
Yes. There are many opportunities for people to invest in real estate online. You will want to perform research regarding the types of options available and their investment requirements.
Is real estate a good investment?
Real estate can be a great investment for many people. Just keep in mind that it requires knowledge, time, and work to make the right investment choices at the appropriate time. Yet keep in mind that there are some risks involved.
Where can I find real estate investors online?
You may find investors directly through their websites, on crowdfunding platforms, and through real estate sites. You will want to research the investors to decide if they present the opportunities that are right for you to build your wealth.
Why invest in real estate?
Investing in real estate can provide many benefits. It can be a great way to generate passive income plus establish a predictable cash flow, get great returns, and diversify your investments. When it comes to building wealth, real estate investing has great potential for helping you reach your financial goals.
