How To Approach Investing In Real Estate
The investment world can seem rather complex and vast at first glance. It can be difficult and time-consuming for women to find the right answers and make decisions on where their priorities should lie.
One of the most difficult challenges to overcome is particularity. That is, there is no one solution that fits all; each woman is individual. We all have a different levels of risk that we are happy to take, types of investments we favor, and—most importantly—overall goals we follow. Speaking of which I was talking to a friend who asked what is the national reia? I informed her about the benefits such as they offer financial advice on property investment. After my friend used their services she would recommend their services to any inspiring property investor. If you are interested in finding out more about investing, you might want to visit a financial advisor to askhow to invest 100k in stocks for more information.
For us women, another challenge to overcome is control. When it comes to investing, being in absolute control is not always the right answer. We should consider investments outside of our comfort zone and outside of those that we fully understand.
This is not to say that we should jump into anything without doing the research, but we should be open to look outside of our usual scope and learn about other investments. That applies not only to looking at different types of investments but also within the same asset class.
Advance of technology and availability of information means that there are more and more different ways of investing in the same asset classes than we think about or consider.
One such asset class is real estate. It is one of the most common investments we make and one that has been around for a very long time. Sometimes, we probably don’t even consider it to be an investment. However, an investment asset is anything that caries value; hence property falls under that.
There are a few key characteristics to real estate.
- First of all, it is considered to be an alternative investment. An easy way to think of alternative investments is that it is any investment that doesn’t fall under stock, bonds, or cash.
- Second, real estate is a tangible investment (unlike, for example, investing into shares, which is nowadays all done electronically).
A very important thing to remember is that real estate is a long-term and illiquid investment; hence you should never put all of your wealth into it. In general, it’s good to have a well-diversified portfolio.
There are different ways to invest in real estate.
- The first decision to make is whether you are buying it as your primary residence or just purely for investment purposes.
- The next step is to decide if you want to invest into residential or commercial real estate.
- Once you’ve decided on that, the next decision is buying outright or using other vehicles to gain exposure.
Buying outright might seem like the most straight-forward and easy way. However, you need to be sure that you weigh all the costs involved vis-à-vis the return. Costs include such things as stamp duty tax, interest if you take a mortgage, legal costs, property management costs, and others. Another way that you can invest in the real estate market is investing in real estate notes. Note Investing is simply investing in loans or Notes secured by real estate. Many investors buy and sell notes as an alternative to traditional investments.
Income generally is comprised of two parts: rental income and capital appreciation at the time of sale.
These can be generally applied to both residential and commercial. Other added worries of course is finding the tenants and managing the property.
- On one hand, doing it yourself can be very time consuming.
- On the other hand, using an agency is another added cost that eats into your return.
This is where alternative ways of investing into an asset class or gaining some exposure to it come into play. The most common way would be through real estate funds. However, that can still be cumbersome for less-seasoned investors, since such funds tend to have high minimum-investment thresholds.
The last couple of years have seen an emergence of online platforms that operate in a crowd-fund way to offer access to smaller investors.
Some of these have minimum investment amounts as low as £1,000. This way, you can not only access the real estate market at a much lower threshold, but you can also diversify within your allocation to real estate.
Through the platform you own a share in the property by way of owning a share in the holding company, who in turn owns the property. This way the process is made simple for investors as they don’t have to go through the regular steps when buying outright. The provider also finds the properties, manages them, and then sells them at the end of the term.
As an investor you receive the share of the income for the specific property as well as the share of the capital appreciation at the end of the term. Of course, the platform charges you a fee. However, you are able to invest in much easier way and start with much smaller amounts.
Going one step further you could also think about buying shares in construction companies, building suppliers, or any publicly-traded companies related to real estate.
Real estate is just one example of how you could have a variety of ways of investing into the asset class, and it is always very important to consider all of the different options that you have before making any decisions, as it has to fit with your current portfolio, your risk tolerance, and your goals.
Indre Butkeviciute is a wealth coach, business mentor, and public speaker with a background in wealth management. She started her career at Morgan Stanley Private Wealth Management. At the end of 2013 Indre left Morgan Stanley to set up her own venture, Lily Advisory, a boutique outlet providing the tools for women to lead a financially sound and business savvy lifestyle. Read her interview on LadyBossBlogger here.