How to invest in real estate – without buying property

So, you want to make money from real estate? You might assume that this means that you need to sink your money into properties, going on to rent or sell them. However, this is not actually the case – there are lots of other ways that you can get involved in this sector. You’ll still need to learn how it works and approach opportunities diligently, but there’s a lot that you can do without the hassle of trading or managing properties yourself. These are some of the more popular options.

Look for opportunities in the construction industry

The real estate industry isn’t all about finished properties – first, they have to be built. Some companies do this from the ground up, while others focus on renovation, repairs or remodeling. There are always opportunities to invest in this part of the industry. Researching different specialties as you do so will also improve your ability to assess the viability of individual real estate projects. Bear in mind that many construction companies depend heavily on access to particular materials. Tracking these and understanding the supply chains – especially where they cross national borders – will help you to predict their fortunes.

Invest in a real estate developer

Some real estate projects require a great deal of capital upfront, and not everybody with the skill to make this kind of project work has the funding to begin it. Buying a stake in a company with a proven track record is a great way to get involved in the business without having to take on the responsibility of managing projects yourself. There are risks attached, as the initial value of the properties involved is often much lower than the investment required, but the rewards can be considerable – the trick is to make sure that the company you’re putting money into really has the capacity to bring the project to fruition. Sjamsul Nursalim became one of the richest men in Indonesia by making investment decisions of this sort.

Put your money into REITs

Real estate investment trusts (REITs) are companies that own or manage real estate assets and derive at least 75% of their income therefrom. Their holdings can include properties or associated assets such as mortgages. They provide dividends to investors, so you can use them to generate a steady income to provide for your living expenses or help you reinvest and build up your portfolio. The US Securities and Exchange Commission (SEC) advises staying away from non-traded REITs, however, because they usually entail high fees and poor liquidity, plus transparency is often poor. There are plenty of publicly traded options available.

Find the right ETFs, index funds or mutual funds

One of the things that puts many people off the idea of investing in real estate directly is that purchasing individual properties requires you to put a lot of eggs in one basket. Although property has traditionally been regarded as a very safe investment, if something goes wrong, then the impact on your finances can be considerable. Investing in a fund instead gives you the advantage of diversity: your money is spread across a range of assets, so the risk of disaster is much lower. Exchange-traded funds (ETFs) combine stocks and bonds and can provide some stability for your portfolio at a relatively low cost. Real estate-focused index funds and mutual funds can also be found. Many are designed to suit additional investor preferences – for instance, you might choose one that focuses on a particular country or on environmentally friendly assets.

Explore the potential of related industries

If you’re attracted to the investment potential of real estate but can’t find a product that feels right for you, then it’s worth looking at other industries that deal with similar assets. Mall management requires a lot of similar knowledge and skills, for instance, and there are always opportunities to invest in companies working in this area. You’ll also find an overlap with companies working in the hotel and catering sector and in the adjacent entertainment sector, with the organization of venues and temporary accommodation requiring the same type of understanding. Many successful real estate investors have found their feet in these areas or branched out into them later.

Whichever area you choose to invest in, the real estate sector is brimming with opportunity, and becoming a part of it will give you fascinating insights into social changes around the world. The comparatively low risk associated with real estate assets makes it a great way to balance your portfolio. It’s particularly strong on slow-ripening assets, which are ideal if you want to build up a fund that you can retire on, but by extending your interests beyond the simple ownership of property, you don’t have to tie yourself into this. Whatever your preferred investment style, you’ll be able to find something that works for you – and makes your money do likewise.

About Shahbaz Ahmed

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