The real estate market in the United States is constantly changing and evolving, as are the opportunities it provides. In 2021, buyers were forced to compete with multiple offers on each property, tipping the scales heavily in favor of sellers. Due to a supply and demand imbalance, sellers had an advantage. This trend was expected to continue in 2022 but rising inflation and mortgage rates drastically altered that forecast, gradually reversing the trend seen in 2021.
As a recent professional, you may be considering ways to grow your wealth and secure your financial future. One option to consider is real estate investing, which offers a range of benefits, including passive income, diversification, and the opportunity to tap into the growing market of fractionalized real estate. In this article, we will provide an introduction to real estate investing and outline the different types of real estate investments available to you.
Despite higher mortgage rates and inflation, you can still own a property you love. But how? Through Fractional Real Estate investing.
What Is Fractional Ownership In Real Estate?
Imagine you fall in love with a property and want to make it your own. You then look into the cost of purchasing this dream property and discover that it is far out of your price range. You then try to calculate how many years it would take for you to save enough money to buy that property. You summon four friends and show them the property and they love it too. But can five people own a single property? Yes, they can! With the help of fractional real estate investing, even with your first professional job, you can invest in real estate. Whether you're looking to generate passive income through commercial real estate or want to diversify your portfolio, real estate investing can offer a wide range of opportunities. With the advent of fractionalized real estate, you can now invest in a smaller slice of a property, making it easier and more accessible for people to invest and diversify in real estate.
You can do fractional real estate investing, either actively or passively. If you have the expertise and time to identify the right assets, source and select renters, manage and maintain the asset, and sell the asset, then, you should consider Active Fractional Real Estate Investing. If you would rather have some other entities take care of all this, it becomes Passive Fractional Real Estate investing.
Fractional property ownership is precisely what it says - enabling investors to buy a portion of a commercial or residential property. Such investments are sold to private investors who buy one or more slices and receive a proportionate share of the asset's advantages, including usage rights, income sharing, first access, and discounted pricing. Individual shareholders split the cost of an investment. Online real estate investing platforms like RealtySlices.com enable accredited investors to do passive real estate investing by purchasing fractions of commercial real estate in their marketplace from sponsors who are listing such opportunities. Whether you are doing fractional or whole investing in real-estate, there are several aspects to consider before investing.
8 Points to Consider Before Investing In Real Estate
1. Consult an Advisor for Tailored Advice
Get the best advice for managing your real estate portfolio or developing strategies for income-producing properties. With the advisor’s help, you can maximize returns on your real estate investments. This is because they are constantly evaluating the market, new trends, technologies, and other influencing factors as well as considering your needs to help you take advantage of market shifts.
2. Invest With As Small An Investment As You Can Afford
A significant advantage of fractional property investing is how quickly and easily you can begin building your portfolio without spending years saving for a down payment, perfect credit, or learning about the market. Your investment, no matter how small, immediately pays off, allowing you to not only climb the property ladder but also profit from tenancy. For instance, the minimum investment amount can be as low as $10,000.
3. Minimum Eligibility
You do not need a green card to invest in real estate. Many deals and properties can be invested in by both accredited as well as non-accredited investors. At a high level, to be an accredited investor, you should satisfy one of these requirements by the SEC:
A yearly income of more than $200k (for the last 2 years
A combined household income of $300k or more (for the last 2 years)
Net worth more than $1 million (excluding your primary residence).
4. Power Of Real Estate
Real estate is an excellent investment option for any diversified portfolio. Real estate investing is relatively inflation-proof and can be beneficial in any economic climate. Investing in real estate has a plethora of advantages. With well-chosen assets, investors can enjoy predictable cash flow, excellent returns, tax advantages, and diversification—and it is possible to leverage real estate to build wealth.
5. Diversification Of Your Investment Portfolio
Assume again that an investor has $100,000 to invest. She could put a down payment and buy a single-family home, tying up all of her investment capital. Alternatively, she could invest $25,000 in four different properties. The second strategy offers fractional owners portfolio diversification that a single-family home purchase does not. This aids in smoothing out the volatility caused by market conditions.
6. An Opportunity To Get Better Returns On 401 K & Retirement Plan
Industry professionals consider fractional ownership to be a lower-risk, higher-return investment long term investment that should be included in everyone's retirement portfolio. Because of the monthly rental income, capital security, ease of investment, and lower capital requirements, fractional property ownership is one of the best investment options for retirement. You can easily safeguard your financial future by investing during your earning years.
7. How To Choose Your First Deal?
To choose your first deal, you need to consider the following points:
Understand the property types in Real Estate investment - Residential, Commercial, and Land, each with its investment characteristics and sub-types.
Exploring various property classes is valuable. The characteristics of classes A, B, C, and D can vary greatly and will almost certainly impact the success of your investment property.
Investors must understand the various strategies used to determine which is best suited to their investment goals. Common strategies include Core, Core Plus, Value Add, Development, and Opportunistic.
Understand the common real estate opportunity evaluation metrics like Cap Rate, IRR, Cash on Cash, Stabilized Rent on Cost, Equity Multiple, and more. To learn about these terms and formulae for computing them, RealtySlices Blog is beneficial. Use these metrics for your decision-making process as there is no shortage of deals and investment opportunities out there.
Check out fractional investing platforms like RealtySlices for such deals.
8. Constant Research On The Real Estate Market
Whether you are buying or selling, you should always conduct a real estate market study as it will help you understand the current market, how much comparable properties are worth, whether it is an investment property, how much you can charge for rent, and other factors. It will also assist you in staying current with market trends and determining what type of properties to invest in.
Would It Be Wise To Invest In Real Estate?
As a new real estate investor, we recommend you consider Passive Fractional Real Estate Investing on platforms like RealtySlices. This allows to learn by investing in a fraction of a real estate asset over a specified period, and diversify across multiple investments on a simple, affordable, and trusted platform, to get solid risk-adjusted returns. Such real estate investing can be more secure because it is backed by an asset, enables anyone to invest with a small amount of money and provides a combination of periodic income and capital appreciation, and tax benefits.