3 Ways to Invest in Real Estate

3 Ways to Invest in Real Estate

3 ways to invest in real estate.

The three most common ways people invest in real estate are through homeownership, REITs and ETFs, and direct investment.

How to Invest in Real Estate

There are so many different ways to invest in real estate, but these are the 3 most common ways – homeownership, REITs and ETFs, and directly purchasing real estate investment property.

Home Ownership as an Investment

The true costs of owning a home are often forgotten until after closing on the property. Owners should remember they need to spend anywhere from 1-4% of the value of the property on maintenance and upkeep.

Has much lower returns than the stock market. Returns are near 0% once inflation and maintenance are taken into consideration.

REITs and ETFs

Exchange traded real estate funds and REITs are based in real estate but are also listed on the stock exchange. The benefits and problems are related to the regulations required to get listed on the stock market. These regulations are extremely expensive and add to the costs.

Though you technically may own a portion of the real estate, you have absolutely no say in what real estate you buy or how it’s managed. You can only vote with your feet and sell your shares and move on.

Managers can take 10-20% of the money and give you a “normalized profit.” If you get 8% you are happy, but you paid a ton of managers and other people. 8-12% seems good, but not when you know how much they took off the top.

Directly Invest in Real Estate

People are afraid of this because they don’t want to “fix leaky toilets” or any number of other excuses. Who wants to fix toilets? I don’t even think plumbers like to fix them.

The reality is direct investments can be as active or passive as you want them to be. You can actively manage your property, or go a more passive route. So, you can fix toilets if you are hands-on, or you can just hire other people to do it.

The greatest benefit to directly investing in real estate is that you can leverage your returns. Returns can be leveraged into huge returns, often > 20%.

Lastly, you can decide which properties to invest in and which ones to skip. You can also decide how to deal with problems or let someone else figure it out. You have a high degree of control.

By | 2017-10-12T15:07:59+00:00 August 18th, 2016|Categories: Investing, Real Estate|10 Comments

About the Author:

An investor that reached financial independence at the age of 30, Eric has been seen on Forbes, Trulia, WiseBread, TheStreet, and other financial publications.

10 Comments

  1. Rob @ Money Nomad August 29, 2016 at 2:18 pm - Reply

    I love the infographic at the beginning of this post. That’s awesome! And thanks for sharing this great list of ways to invest in real estate. Finally, congrats on not celebrating Labor Day! Once we’ve both dominated financial independence we’ll have to meet up and have a non-Labor Day BBQ. 🙂

    • Eric Bowlin August 29, 2016 at 2:40 pm - Reply

      A non-Labor Day BBQ sounds like a great idea! Can’t wait.

  2. Aramis Realty March 26, 2017 at 9:33 pm - Reply

    A very informative article about real estate investment! People who wanted to invest in real estate must learn the basics in order to understand that it is possible to get high revenue from this.
    Aramis Realty recently posted…Essential Property Maintenance TipsMy Profile

  3. Antoine July 18, 2017 at 11:38 am - Reply

    Hello, I wish the infographic was up… 🙁 at the same time, I like the idea of no maintenance investing. Its cleaner and stay sane by knowing that I will receive monthly check regardless… No chasing bad tenants.

    • Eric Bowlin July 28, 2017 at 6:51 am - Reply

      Thanks for the comment and pointing it out! Somehow the image dropped off, so I got it back up for everyone to see.

      Thanks for your comment.

  4. Sunny Batra September 12, 2017 at 12:37 am - Reply

    Nice Aritcal Eric, Thank for providing the benefit and drawback of various investment oppurtnity available to invest in real estate.

  5. Courtney K September 13, 2017 at 11:08 am - Reply

    I love the infographic! It is easy to understand and full of good information. I like how you broke it down into the different investments and listed the pros and cons. Thanks for sharing!

  6. Tristan Chua September 25, 2017 at 3:29 am - Reply

    Very nice infographic and of course a very informative post as well in regards to investing in a real estate. Thanks for sharing this and keep up the good work!

    • Eric Bowlin October 12, 2017 at 3:01 pm - Reply

      Appreciate it! I love infographics and I’m trying to incorporate more into my content.

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