Many people are looking for answers on how to invest in real estate. Real estate investments usually involve large capital investments. However, lacking such amounts does not necessarily mean you cannot invest in that sector. With new trends taking hold in the industry, there are many other ways investors can benefit from property valuations without constantly worrying about building maintenance. Investors who invest in real estate beyond traditional real estate purchases can invest in multiple locations, property sizes, and different property classes.
Where Can You Invest in Real Estate?
Several options allow you to enjoy the benefits of real estate investing without the responsibility of maintaining the property. Let’s have a look at some of them below:-
1. Real estate investment trust (REIT)
Real estate investment trusts (REITs) are specialised companies that make debt and equity investments in commercial real estate. REITs were introduced in 1960 to allow investors to invest in real estate as an asset class and are known to offer small and medium-sized investors at least 7-8% annual returns. Like a mutual fund, a REIT investor owns shares in her REIT and receives income in the form of dividends based on the performance of her REIT investments. Choosing companies with a track record and high dividend yields is best for those considering investing in REITs.
2. Real estate wholesaling
Real estate wholesaling is a great way for individuals to enter the real estate industry without investing large sums of money. It is a form of real estate sale in which an investor, also known as a wholesaler, enters into a contract to purchase a property believed to be undervalued.
The property is then sold to the end user at a profit. This process helps beginners gain insight into the real estate market and practise their bargaining skills. Wholesalers generate revenue through transaction-related fees, which are usually a percentage of the total property value.
3. Real estate mutual funds
Investing in real estate mutual funds is beneficial for diversifying your investment portfolio. The concept is similar to a mutual fund, where the investor owns a portion of the fund, and the company owns the investment. Profits come in the form of dividends or a constant increase in the stock price.
The real estate investment mutual funds invest primarily in REITs, real estate stocks, and outright purchases of residential, commercial, and industrial units. This option favours smaller investors who shy away from direct real estate transactions. An important point to consider is that real estate investment trust returns depend on several factors, including demographic supply and demand, market conditions, and interest rates.
4. Online investment platform
Online real estate investment platforms pool funds from multiple investors and invest on their behalf in expensive-to-explore opportunities. They vary widely regarding investment products, property types, and minimum investment amounts. The online platform focuses on residential and commercial real estate, allowing investors to invest in single properties or multiple real estate options. However, this medium is best suited for those who can afford to continue investing without interruption for a long period.
5. Hard Money Loans
A hard money loan is another way to invest in real estate without buying the property outright. With this type of loan, you lend money to individual investors to finance the purchase of investment property. The interest rate is higher than a traditional loan, but the yield is also higher.
These loans require little or no documentation and can be financed from Rs 4 Lakh to Rs 1.6 Crore. They also have short processing times (usually just a few weeks), allowing you to close more deals in the same amount of time as other credit types. Finally, specific loans are typically used for short-term projects.
How to invest in real estate in India?
To proceed with property investment in India, it is important to understand that the process can be done with or without purchasing the actual property. Follow the steps below to learn more about how to do it.
- Start by evaluating the type of revenue you need (long-term or short-term). Real estate usually takes some time to pay off, so keeping a realistic approach is best.
- Contact a financial advisor who can guide you based on your financial portfolio and help you grow.
- Decide whether to invest in a property or put your money in other real estate opportunities without buying a home, such as REITs.
- Once decided, set the investment period for a lump sum or interval-based payments. You can choose the frequency of your investments, such as monthly, annually, or semi-annually.
- Track investments made and track returns generated over some time. Compare your return to the time it takes to achieve that return to determine your return on investment.
Real estate is a stable investment asset providing passive income and a great wealth-building opportunity. If you have the money or are willing to take out a loan, consider investing that money in real estate. All the options mentioned above can help you invest in real estate without having to buy property, which is an excellent solution if you do not have the means to make a big purchase.