Investing can be a daunting task, especially for those who have never done it before. While many people think of investing as trying to make a short-term score in the stock market, it's long-term investing where investors can create real wealth. One way to do this is through real estate investing.
Real estate investing is a popular way to build wealth over the long term, but it can also be a risky venture, especially for those new to the game. However, there are ways to invest in real estate with minimal risk. "Buy real estate, hold it for a long time, and maximize the tax benefits," Wieland says about creating wealth.
Here are some low-risk real estate investing strategies to consider:
House hacking is a great way to get started in real estate investing. It involves buying a multifamily property, living in one unit, and renting out the others. This strategy can help you build equity in the property while also generating rental income.
Renting Out a Room
If you don't want to buy a multifamily property, you can still generate rental income by renting out a room in your home. This strategy is less risky than buying a property, and it can still help you generate passive income.
Real Estate Investment Trusts (REITs) are companies that own and manage income-producing real estate. They are a great way to invest in real estate without having to own and manage the property yourself. REITs can provide a steady stream of income and are a less risky way to invest in real estate.
Real Estate Crowdfunding
Real estate crowdfunding is a newer way to invest in real estate. It involves pooling money with other investors to invest in a real estate project. This strategy allows investors to invest in real estate with less money and less risk than buying a property on their own.
Real Estate Syndications
Real estate syndications are similar to crowdfunding, but they involve a group of investors pooling their money to purchase a property. The investors then share in the profits generated by the property. This strategy is less risky than buying a property on your own and can generate a steady stream of passive income.
Wholesaling involves finding a distressed property, getting it under contract, and then selling the contract to an investor for a profit. This strategy is less risky than buying a property because you don't have to own the property yourself. However, it does require a lot of knowledge and skill to be successful.
House flipping involves buying a distressed property, renovating it, and then selling it for a profit. This strategy can be risky because if the property doesn't sell for the desired price, the investor can lose money. However, if done correctly, house flipping can be a profitable real estate investing strategy.
Turnkey properties are properties that have been fully renovated and are ready to be rented out. These properties are less risky than buying a distressed property because they are already in good condition. However, they can be more expensive to purchase.
Vacation rentals can be a profitable real estate investing strategy. However, they can also be risky because they rely on tourism and can be affected by economic downturns. It's important to thoroughly research the area before investing in a vacation rental property.
Commercial Real Estate
Investing in commercial real estate can be a profitable strategy, but it can also be risky. Commercial properties typically require a larger investment than residential properties, and they can be affected by economic downturns. However, if done correctly, investing in commercial real estate can provide a steady stream of passive income.
Private lending involves loaning money to other real estate investors. This strategy can be less risky than investing in a property yourself because you don't have to own the property. However, it's important to thoroughly vet the borrower before lending money.
Investing in tax liens can be a low-risk real estate investing strategy. Tax liens are placed on properties when the owner fails to pay property taxes. Investors can purchase these liens and earn interest on the unpaid taxes. If the owner fails to pay the taxes, the investor can foreclose on the property.
In conclusion, there are many low-risk real estate investing strategies to consider. It's important to thoroughly research each strategy before investing any money. "That first one is really the hardest, but once you get one the second one is so much easier," says Dan Lane. To make things a little easier, the Fortune RecommendsTM editorial team rounded up a few of the most promising investments, according to Benzinga's put together a list of 10 high-return investments — with low, medium and high-risk options you can review. If you prefer to grow your money outside the stock market, check out alternative investment options to put your money to work for you without risk everything on the stock market. And remember, it is inadvisable for an investor to invest using a loan through a risky investment avenue like the stock or derivatives market.