At some point in your of life, you must have thought of achieving that financial independence? And then you must have been tempted for a while to invest in real estate? It happens with a lot of people. Most of the people never invest in real estate because of the lack of knowledge or the perceived risk involved in this business.
They think they'd make no returns and eventually may lose all of their capital. Some find it very time-consuming to own and manage a rental property. However, all of these fears and excuses are outweighed by the fact that investing in real estate is one of the classic ways to build wealth.
If you want to invest in real estate but don't have time for it, don't worry. There are a lot of options available in the real estate industry which can protect your future and diversify your income. Many of these approaches in the business of real estate can be used to generate thousands of dollars on the side, or they can produce a regular passive income, it’s just a matter of how seriously and diligently a person is willing to work at it.
In fact, the investment part of real estate is not that time-consuming at all. It includes planning and executing your investment strategy just like stock investment. You just need to allocate money, determine your risk tolerance and learn how to find the best deals in the market.
The business part of real estate is a definitely a time consuming affair, if you are doing a lot of other things. It involves managing a rental property, doing minor or major repairs, handling electric or plumbing issues, screening tenants, and a bunch of other stuff that is very time consuming. It can also take a lot time in doing marketing of your property to find potential buyers in case of fix and flip.
However, all of this can be delegated to those companies who are actively involved in this business. For e.g; hiring a property management company, which can manage your rental property as well as affairs of your tenants such as collecting rent and addressing their grievances.
Let’s learn how to invest in real estate when you are too busy with almost no time to follow the traditional routes.
How To Invest In Real Estate When You Have Time
One approach and the one popularized by a number of TV shows is the fix and flip. Most people have neither the time nor the expertise to do this right. The TV shows make it seem like you can find a great fixer-upper in a couple of showing, work one or two weekends and sell it for a profit.
The reality is that the properties you’re most likely to find need massive renovations or careful budgeting regarding repairs and upgrades if you’re going to sell it for a profit. This is also the riskiest real estate investing approach. If you over-price the property, add amenities that turn off most buyers or fail to meet public expectations, you’ll end up losing money due to the mounting carrying costs.
Another popular approach is fix and rent. You buy a property. You make the needed repairs or modest upgrades. Then you find a tenant and rent the property out. This approach has less risk than fix and flip. You’re typically holding the property for years, reducing capital gains if you sell.
You’ll also see the payout when the property sells for a profit because of the upgrades. The tenant generates monthly income. If you sell the rental property with the paying tenant to another investor, you’ll receive more for the home than if you simply fixed and flipped.
Yet there are other strategies for real estate investors, including those who don’t have the time to either of these approaches. Let’s look at some of the best options for those who say that they don’t have time for conventional real estate investment.
How To Invest In Real Estate When You Have No Time At All
1. Buy a Leased Property from Another Investor
Real estate is far more stable than the stock market, as the novel coronavirus and other “black swan” events demonstrate. It generates regular cash flow in almost every season, if you own rental real estate. It can generate significant capital gains, whether or not you’re fixing and flipping. And it has a number of tax advantages over other investment strategies.
We mentioned previously that a property investor could buy a home, fix it up, rent it out and eventually sell it to another investor. This is a good option for real estate investors who want to start generating cash flow immediately. You don’t have to spend time fixing up a property. You don’t have to go hunting for investment properties.
You only have to step into the role as a landlord and start collecting rental checks. You could learn how to make repairs or hire others to make needed repairs. Furthermore, you can slowly build up your portfolio or rental properties, using equity from each purchased property and saved money from the rental income stream to put money down on your next occupied rental.
A side benefit of this approach of real estate investing is that banks will loan you the money to buy these properties just as they would any other home. If you have occupied single family homes, you could sell them and buy an apartment building without having to pay any capital gains taxes.
One benefit of this approach is that you’re minimizing your risk. You don’t have to seek hard money loans and try to finish home renovations on time to earn a profit. You may even be able to buy properties at a discount because another investor is desperate to unload the property.
On the flipside, it is difficult to find properties like this unless you’re in an investor group. After all, the average realtor can only tell you what homes are for sale. You are also taking the risk they sell the property to you for more than it is worth, because you don’t know how to take the value of the existing tenancy into account.
2. Buy a Fully Managed Rental Property
If you want to how to invest in real estate when you have no time at all, buying fully managed rental property is the best choice. For those people who have lots of cash but do not know how to invest in real estate, it's an extremely lucrative and low-risk way to build serious wealth from real estate.
When you invest in real estate this way, you’re buying a home or multi-family property that not only has tenants but a property manager in place. This eliminates all the hassle on your part. You only need to pay cash or get a mortgage to invest in real estate this way.
The property manager screens tenants, handles repair calls and maintains the property. They take anywhere from 8 to 15 percent of the rental income for doing this work. The more properties you have, the lower the percentage they take. For example, if you already own five rental homes, they may lower the percentage they take if you add a sixth property to their roster.
What are the risks of this approach? You have to thoroughly vet the real estate management firm. If they’re mistreating tenants, you may eventually be held liable. If they aren’t doing a good job maintaining the properties, your property is losing value.
You need to be networked with other investors to buy such properties. This does raise the risk that someone else fixes and rents out the property and then over-charges you when they sell it to you, taking advantage of your ignorance.
3. Investing in Real Estate Indirectly
Shopping potential investment properties is a relatively good way to invest in real estate when you have no time. You only have to raise capital to buy the property, shop for properties and close on the deal. Get the property manager or supporting cast of contractors in place, and there’s relatively little work for you.
However, some people don’t want to do that much work. Or they’re afraid of the liability risk that comes with owning rental real estate. You can reduce this by holding the rental properties in a limited liability corporation and having liability insurance. By investing in real estate indirectly, you eliminate the need to oversee property managers or the fear of being sued because asbestos was found in a property you bought.
One solution is buy shares in a real estate investment trust or REIT. REITs may be bought and sold like stocks, or they may be closed shares that can only be sold to other investors. REITs have a number of advantages. You own a share of the building, but you don’t have to manage it. You can even diversify geographically by investing with reputable real estate investment companies.
Not only will you get that diversification, but you'll get some peace of mind knowing you're working with someone really experienced. Alternatively, if you want to invest more passively with someone local, make sure they are very experienced and have a track record of doing these kinds of deals and handling investor funds.
REIT shares bought on the stock market are as liquid as other securities traded on the stock market. REITs pay out around ninety percent of their revenue in dividends to shareholders. That generates steady cash flow when the properties are well-managed. You can buy REITs that are focused in market segments you’d never dream of targeting yourself.
For example, there are REITs that specialize in medical real estate, nursing home construction, and commercial buildings. You can diversify your holdings by buying REITs in a variety of market segments or REITs that invest in different parts of the country. And you can set up the REIT dividends to automatically reinvest, whether you buy more shares of that REIT or stocks and bonds.
The downside of this approach is that you’re outsourcing property management to people selected by a corporate board. You have almost no control over how they manage properties or how they choose to expand. If the leadership of the REIT makes bad decisions, you lose your investment if you don’t sell in time. And that’s assuming it is a REIT you can sell at any time.
If you want to know how to invest in real estate when you have no time or are too busy, remember that stock market investing may allow you to invest in real estate indirectly. For example, you could buy stocks in home builders. Another approach is buying stock in companies that supply the real estate industry such as building supply manufacturers and home improvement companies.
This approach is infinitely flexible. You don’t have to worry about the management of a particular real estate development. You can do your research regarding various companies or follow the advice of an investment advisor. Furthermore, you could buy familiar brands. You know you’ll profit from people buying items there to repair the damage caused by natural disasters as well as home builders buying materials.
This gives you more reliable returns than investing in home builders. One downside of this approach is that your real estate related stocks will rise and fall with the stock market. A housing market crash could hurt the value of the stocks. Another downside is that there is rarely cash flow from such investments.
You’re almost always relying on profits made when you buy low and sell high. You run the risk of selling when that particular stock is down and losing money. You can balance the risk by buying diversified real estate exchange traded funds, but now your losses and gains are going to track the general stock market. Real estate investing is not subject to the same volatility.
Key Takeaway
You don’t have to become a landlord and learn how to unclog toilets to make money. There are a number of ways you can invest in real estate if you don’t have time to fix and flip or fix and rent out. Simply determine what approach works best for you. And don't think that time constraints limit you, because you can invest in real estate no matter how much time you have.
Like all other investments, real estate has its share of risks. There is no way to completely avoid the risks. However, one important advantage of investing in real estate is that it provides a hedge against inflation. Inflation erodes the value of many investments but real estate investments keep pace with inflation. As the prices of basic amenities go up, so do rents and property values.
So, what's holding you back to invest in real estate apart from the lack of time?
We Can Help You To Invest In Real Estate If You Don't Have Time
Buying or selling real estate, for a majority of investors, is one of the most important decisions they will make. Choosing a real estate professional/counselor continues to be a vital part of this process. They are well-informed about critical factors that affect your specific market area, such as changes in market conditions, market forecasts, consumer attitudes, best locations, timing and interest rates.
NORADA REAL ESTATE INVESTMENTS strives to set the standard for our industry and inspire others by raising the bar on providing exceptional real estate investment opportunities in the U.S. growth markets. We can help you succeed by minimizing risk and maximizing profitability. Consult with one of investment counselors who can help build you a custom portfolio of turnkey cash flow rental properties in the various growth markets across the United States.
All you have to do is fill up this form and schedule a consultation at your convenience. We’re standing by to help you take the guesswork out of real estate investing. By researching top real estate growth markets and structuring complete turnkey real estate investments, we help you succeed by minimizing risk and maximizing profitability.
References:
- Traditional methods
https://www.thebalancesmb.com/pros-and-cons-of-flipping-a-property-2124830
https://www.investopedia.com/articles/mortgages-real-estate/08/house-flip.asp
https://investorjunkie.com/real-estate/pros-and-cons/ - REITs
https://www.fool.com/millionacres/real-estate-investing/reits/reit-investing-101/
https://www.investor.gov/introduction-investing/investing-basics/investment-products/real-estate-investment-trusts-reits - Invest in stocks tied to housing industry
https://www.fool.com/millionacres/real-estate-investing/
https://www.fool.com/investing/how-to-invest-in-housing-stocks.aspx - Buy managed properties
https://www.thebalance.com/investing-in-real-estate-4073643
https://www.entrepreneur.com/article/304577 - Buy property and rent out
https://www.investopedia.com/investing/simple-ways-invest-real-estate/
https://finance.yahoo.com/news/3-reasons-invest-real-estate-162613968.html
https://www.mashvisor.com/blog/benefits-of-investing-in-real-estate/
