Learn How You Can Invest In Real Estate

Author: Jennifer Patterson Gregory

05-07-2021

Jennifer Patterson Gregory, one of the top realtors in Dallas-Fort Worth with over $4,000,000 of homes sold last year, talks about the different ways you can invest in real estate!

The American Dream

We all know that part of the American Dream is to be a homeowner. This was a privilege only granted to the upper class in past generations, but our Founders wanted better opportunities for the majority vs the minority. America has done a phenomenal job of providing the average American opportunities to purchase their very own home. Now, in our modern America, we have come to the point that even the majority of Americans have the chance to purchase real estate as part of their investment portfolio. Let’s take a look at different ways that you can utilize real estate to bolster your long-term investment strategy.

REITs

First, there are REITs (Real Estate Investment Trust). A real estate investment trust (REIT) is a company that owns, operates, or finances income-generating real estate. Modeled after mutual funds, REITs pool the capital of numerous investors. This makes it possible for individual investors to earn dividends from real estate investments—without having to buy, manage, or finance any properties themselves (Investopedia). There are many REITs out there, so you want to make sure that you do your research before diving in, but it’s a good way to passively invest in real estate.

Private Money Lending

Next, is private money lending. Think of this like when Mom and Dad give you a loan to help buy your first car, but on a larger scale. Private lending is typically used to help individuals who want to flip houses purchase the home and do repairs without having to go to a bank for a loan. The terms are set between the lender and the borrower. The plus is that the borrower has more favorable terms for their flip and the lender earns a higher return rate on their investment. There are also conglomerates for those lending that allow you to be a part of bigger projects than you could have done as a single individual.

House Flipping

Third, is flipping homes. This is currently the most popular real estate investment strategy. This is more of a short-term investment, typically 2- 4 months depending on construction and hold times. I, as an agent with a degree in design, love this process. It’s like an Easter egg hunt- finding the worst house in the best neighborhood. Then you get to take this diamond in the rough and make it shine bright and new. Unfortunately, a lot of flippers simply put lipstick on a pig and don’t do the house (or future families) justice. When flipping a home, you need to keep in mind that construction always has hidden costs. If you don’t have contingency funds set aside, contractors that take pride in their work, and a clearly outlined budget, this can turn into a money pit real quick. Keep your decisions methodical and business-focused, not emotionally driven.

Rentals

Finally, we come to rental units. This is the one that EVERY Multimillionaire takes part in. Rental units are seen as a long-term investment opportunity. These should be looked at just like the stock market. You’ll have good years and bad years, but in the end, you’ll come out on top if done smart. It is possible to purchase rental units with a conventional loan from your neighborhood bank, so no need to cash out your retirement! You can also go in with a group of investors and get in the multi-family unit game (ie apartments, condos, quad, and duplexes). Either way, when purchasing the unit, you need to make sure that you include your mortgage payment, taxes, and insurance when considering what to charge for rent. A local real estate agent can run comps for you so you can see what other rental units in the area are going for as well. You also need to keep money set aside for repairs and touchups between tenants. Again, plan for the worst and hope for the best!

No matter which avenue you choose, real estate is one of the best investments you can make. I do highly recommend you use a licensed real estate agent to help you with all of you purchases and sales. They will save you money in the long run! As well, I recommend using an accountant and financial planner to assist you with all other financial decisions.

Learn more about Jennifer here.