The 2020 housing market was notable as the year of unpredictably low mortgage rates, rising house prices, and tightening inventories. As 2021 continues, it appears that investing in real estate is no longer an option unless you have a substantial income. However, things are always as they seem; it’s still possible to get involved in the real estate market in the following ways.
1. Real Estate Crowdfunding
Investors hoping to get into real estate without any capital can turn to crowdfunding to connect with other investors through the Internet and social media. Consider real estate crowdfunding if you cannot fund an investment yourself and are willing to share a percentage of the bought home with others. Real estate crowdfunding is similar to equity crowdfunding but is available to anyone as long as they can invest an amount that exceeds $5,000 in most cases.
2. Real Estate Investment Trust (REIT)
A REIT is a business or person that owns, finances, or operates real estate as a way to make an ongoing income. REITs have a presence in the stock exchange, so individuals can sell their state in the company if they require immediate access to their funds. An individual that can’t become a REIT can choose to invest in one or more of these companies in the stock market. Investing in REITS can diversify your portfolio, which can make you more trustworthy to banks.
3. Real Estate Exchange Traded Fund (ETF)
An exchange traded fund is similar to a REIT, but an ETF contains a group of stocks and bonds that come together into a single fund. Investing in an ETF comes with these advantages:
- Buy-in is lower than real estate crowdfunding. You can invest a small amount if you’re unsure about putting a bulk amount in a long-term project, like buying a home.
- ETFs are liquid assets that are easy to sell if you need money immediately.
- If one REIT in an ETF doesn’t succeed, the entire investment isn’t lost.
It’s better to invest in an ETF with millage, like iShares Global or Vanguard.
4. Mutual Fund Tied to Real Estate
Mutual funds are also purchasable on the stock market and act the same as ETFs, but they can only be purchased or sold when the day ends. Its price is based on the net asset value. Similar to ETFs, they have many benefits, but they also come with a significant downside:
- Diversifies your portfolio without exposing yourself to the bonds or stock market.
- Funds are tradable on short notice; you only have to wait for 24-hours at most.
- Both residential and commercial real estate are available through mutual funds.
Unfortunately, mutual funds are more expensive than REITs and ETFs and usually have lower returns. Mutual funds are intended for long-term investors.
5. Invest in Any Real Estate Company
Real estate is an industry with multiple moving parts. You can invest in a business that services real estate in some capacity, like house flippers, gardening or landscaping companies, or HVAC. Some tech businesses specifically service homes, so search for these companies as well. It’s essential to research each company to ensure that your investment is worthwhile, or you could have a portfolio full of businesses that expired, went bankrupt, or earned little money.
6. Invest in Home Construction
You don’t have to invest in actual properties to get involved in real estate. When the market rebounds after the pandemic, many home construction companies will pick up again and see huge returns. To invest in this stock properly, ask yourself the following questions:
- How is the current market? Right now, the market isn’t doing well, but that doesn’t mean it won’t pick up shortly. Some states have better markets than others.
- How is the American economy? A growing economy will produce more homes, and more investors will buy them up. Homes will maintain their value as a necessity.
No one can predict the future, but investing in home construction is usually a sure bet.