People often think that real estate investing requires large amounts of capital, let alone the amount of time required for upkeep and maintenance. If you have the money, you could choose to “Buy and Rent” or even “Buy and Flip”. But the time commitment alone often scares potential investors away. Most investors wonder how to get into real estate investing, but it’s actually much easier than many think. Real estate investing doesn’t always mean you have to own and maintain the property. You can still invest in real estate without having to deal with the thought of plunging the toilet your tenant backed up, or working on your sledgehammer swing for that oh-so-fun demo day.
Isn’t it great to know that you can leave those cleaning gloves under the sink and keep those “dirty work” jeans in the drawer? There are plenty of options that allow investors the opportunity to take advantage of the benefits of real estate investing without the added headaches.
These alternative investments are often referred to as “passive investments”. You don’t have to do much but invest your money and forget about it until your investment matures, which is an excellent way to diversify your assets and create a reliable income stream.
The following options would ease the wonder of how to get into real estate investing:
Limited Partnerships are basically partnerships formed for the purpose of a business venture. Some partnerships, like the ones we offer here at Jakob Pek Fund, give investors an opportunity to earn a high interest rate on their investment through unsecured Limited Partnership notes. These notes are secured with real estate as collateral – minimizing risk to investors. Some Limited Partnerships also offer short and long-term investing options, which provides some flexibility to investors.
Master Limited Partnerships
Other options you may consider when researching how to get into real estate investing, are Master Limited Partnerships, which are publicly listed securities that trade like stocks, but are taxed as partnerships (not as corporations). Many investors like the added tax benefits that MLPs provide. They also give investors the opportunity to passively invest not only in real estate, but also in pipelines, storage tanks, and other cash-generating energy infrastructure. Master Limited Partnerships give the majority their income to shareholders in the form of distributions, similar to Limited Partnerships.
Real Estate Investment Trusts
Real Estate Investment Trusts better known as REITs, are professionally managed companies that own a portfolio of income-producing investment properties. REIT shares are traded like stocks on an exchange but are a good option for those who want to passively invest in real estate. You’ll often find REITs as investing options in many 401k portfolios, or other retirement vehicles.
Crowdfunding projects, simply enough, pool together funding for a particular project or venture usually in real estate. This is a new type of investment that has emerged over the last decade. It’s not unusual to find a pool of 500 or more investors for one crowdfunding project focused on real estate development. Crowdfunding differs from REITs by extending the investment opportunity to “novel,” or “average” investors. This method also focuses on private, real estate investments as opposed to publicly traded shares of properties.
As a result of the JOBS (Jumpstart Our Business Startups) Act, signed by President Obama in April of 2012, people who make less than $100,000.00 per year can invest in these companies up to a maximum amount while higher-earning investors have different limitations. Collected funds are used to build and develop private real estate while promising higher than average returns after a specific period of time.
If you’re searching how to invest in real estate, these are all viable options that can allow you to do so without the added stressors. However, it’s important to remember, that all investments carry risk. With the right amount financial planning and research, you can decide which option is best for you and your financial goals.