How much should you invest in real estate? It really depends on which route you take. Your minimum investment could just be a few dollars, or it could range from thousands to millions. There are numerous investment options out there, you just need to figure out what you can afford and how hands-on you want to be.
In this article, we’ll talk about a few different investment types including:
- Rental property investing
- A Real Estate Investment Trust (REIT)
- Online Crowdfunding with a Private Sponsor
When it comes to investing your money, there have never been truer words than “Diversify your portfolio.” It’s simple, diversification helps you offset the risks of hurting your potential profits because not all your eggs are placed into one type of investment.
Investing in real estate could be the perfect alternative, high-potential option for you to possibly maximize your portfolio and to realize your financial goals quicker.
Rental Property Investment Considerations
For a rental investment property, buyers will typically need a 20% down payment. So, if you’re looking into purchasing a single-asset home for $300,000, your down payment will be $60,000. Don’t forget to factor in 2-3% for closing costs too.
With all the costs added up, the one caveat to rental property investing is the amount of cash you’ll need on hand for a down payment.
Additionally, you also need to consider what you want out of the process. For example, how hands-on-or-off do you want to be when it comes to overseeing the following tasks:
- Scouting potential properties to invest into
- Managing demolition, construction and/or renovation projects
- Finding tenants to live in the property – including marketing
- Managing the property as issues arise
- Selling the property when the time comes – including marketing
These are just a few management processes that someone investing in a real estate rental property will need to consider handling. Of course, there are property management companies that can help with these tasks too—however, the costs will vary though.
If this process sounds like too much of a hands-on approach for you, there are other avenues that allow you to invest in real estate without time constraints.
A Real Estate Investment Trust (REIT)
REITs are one of the easiest ways for people to participate in the commercial real estate market because the price demands are typically cheaper than most other options. Most people can start out with a little bit of cash to get started. Additionally, you can set up a reoccurring payment system to keep the investment growing over time.
REITs are securities that are publicly traded via the major stock exchanges, typically they’re specialized to a particular property type, or to a targeted region. While a knock on some real estate investments—like rental properties for example—can be a difficult and slow process to get out of, REITs offer investors potentially high dividends in return, while also converting to liquid form when they want to sell.
REITs impact a vast net of different real estate property types including, but not limited to:
- Hospitals & medical facilities
- Data centers
Look closely at the REIT you’re interested in investing in. Most focus on a specific property type, but there are a few out there that will diversify into multiple property types.
Online Crowdfunding with a Private Sponsor
Online crowdfunding is a relatively new concept to the real estate investment game. Basically, it lets you combine your money with other investors to fund commercial real estate projects. Typically, the minimum investment is around $25,000 per investor, but like all funds, these prices can either be higher or lower.
This is what the process might look like: Hypothetically, a private real estate fund sponsor could identify a project they believe could net them high capital gains in the next few years—like a psychiatric hospital for example. Next, they would apply for a bank loan, put a down payment with their own cash and then raise the rest of the required funds through an online platform from a pool of individual investors.
Once the funds are raised, the property is then acquired, renovated, and then rented out/or sold outright. The profits are then shared with the investors upon the completion of a deal.
Are You an Accredited Investor? Check out Caliber.
There are over 12 million households in the US considered eligible to be accredited investors. If you fall into this category and are looking to diversify your portfolio, there are high-potential alternative opportunities in real estate investing worth looking into.
With Caliber, all its investments are structured so its investors profit first. Additionally, Caliber is an expert on middle-market investments in the Southwest & Mountain West regions of the U.S.—focusing on investments in Arizona, Colorado, Idaho, Nevada, Utah and Texas. With years of experience in this market, Caliber has specialized access to numerous unique groups, politicians, and local businesses that create better processes and greater deal flows for its investors.
As an investor, you can count on Caliber’s long-term track record, its mission of communication and transparency, and its expertise in real-estate investment practices to help you grow your wealth. Caliber offers multiple investment solutions from monthly income to aggressive growth, while also serving as one of the premier qualified opportunity zone fund sponsors in Southwestern, USA.
Don’t miss out on your opportunity to tap into Caliber’s real-estate expertise in acquisitions, asset management, and its ability to sell, refinance, and reinvest.
Now is the time to build your wealth and transform communities today. Contact us at [email protected] to learn more about your investment opportunities today.