How to invest in real estate to build long-term wealth

real estate investing ideasPhoto by iAlicante Mediterranean Homes on Unsplash

Tanza Loudenback 6/27/2019
MSN Money

Real estate can be a very lucrative investment, but it requires a huge time commitment, patience, and most importantly, cash.

While there are options for novice investors to get into real estate, the big returns are found in the big investments – for example, buying and managing a multi-unit building or fixing up a single-family home and selling it for a profit.

Here are a few ways to get into real estate investing: How to invest in real estate to make money

save money buying and selling real estate

1. First, get your finances in order

Before getting in to any type of real estate investment, get the rest of your financial house in order – establish an emergency fundpay off consumer debt, and automate your retirement savings.

Real estate is a particularly expensive investment, so you need to have cash on hand for a down payment (or to buy the property outright) and a reserve to dip into if and when something needs fixing, which should be entirely separate from your everyday emergency fund.

2. Try investing in a REIT

If you want to wade into real estate, investing in a real estate investment trust (REIT) will provide exposure to the market without the time and cost commitment of buying your own property.

Equity REITs, the most common type of REIT, allow investors to pool their money to fund the purchase, development, and management of real estate properties. A REIT focuses on a specific type of real estate, such as apartment complexes, hospitals, hotels, or malls. Ninety percent of annual earnings – usually in the form of rental income – are returned to the investors as dividends.

low commission

If you want to keep your investment liquid, stick to publicly-traded REITs. You can buy shares through a brokerage firm, IRA, or 401(k).

Fundrise helps you invest in real estate projects around the US without having to actually manage them. Investors can choose a portfolio to invest in based on their goals – either supplemental income, balanced investing, or long-term growth – and earn dividends quarterly. Fundrise says its platform is best for investors who have a time horizon of at least five years.3. Get to know the local housing market

If you do plan on buying your own investment property, start by getting to know the local market – or better yet, stay in your own neighborhood.

Talk to real estate agents and locals; find out who lives in the area, who is moving to the area, and why; and analyze price history. In short: Do your research.

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About the Author

Blake King
Having lived in Red Deer my entire life and having experience in many avenues of real estate I offer enormous value to my clients.