Investing in Real Estate: Exploring Options for the Average Investor
Certified financial planner Jordan Leaman offers advice on how to invest in real estate with limited funds
As the new year begins, many individuals are setting financial goals and considering new investment opportunities. For those interested in diversifying their portfolios with real estate, the task may seem daunting, especially for those with limited funds. However, certified financial planner Jordan Leaman suggests that investing in real estate is not exclusively reserved for the wealthy. By carefully assessing one’s finances, understanding market trends, and exploring various options, even the average investor can enter the real estate market. In this article, we will delve into three potential real estate investment options recommended by Leaman, providing insights and guidance for those looking to venture into this lucrative field.
Option 1 – Buy an investment property or rent out your current space
Leaman’s first recommendation is for individuals to consider buying a property that they can live in while renting out a room to generate additional income. This approach allows potential investors to gain firsthand experience in managing tenants and assess their interest in real estate investment. Alternatively, Leaman suggests the concept of house hacking, where individuals purchase a multifamily property, reside in one unit, and rent out the others to cover the mortgage and build equity. With mortgage companies now accepting lower down payments for owner-occupied multifamily properties, this option becomes more accessible and affordable.
Option 2 – Buy real estate investment trusts (REITs)
For those not yet ready to take on the responsibilities of property ownership, Leaman recommends investing in real estate investment trusts (REITs). These companies own or finance income-generating properties, providing investors with exposure to the real estate market without the need for extensive knowledge or large capital. REITs can be purchased through brokerage accounts, allowing investors to diversify their portfolios and potentially earn passive income.
Option 3 – Invest in real estate crowdfunding opportunities
Another option presented by Leaman is to participate in real estate crowdfunding through investment platforms. This approach enables individuals to invest directly in real estate projects without bearing the full burden of property ownership. By contributing capital to a pooled real estate fund, investors can receive regular income distributions. Platforms such as Crowdstreet and Fundrise offer opportunities for individuals to engage in real estate crowdfunding and connect with experienced investors to gain valuable insights.
Conclusion: Investing in real estate may seem like an unattainable goal for the average investor, but with careful planning and exploration of available options, it can become a reality. By considering options such as buying an investment property, investing in REITs, or participating in real estate crowdfunding, individuals can enter the real estate market and diversify their investment portfolios. However, it is crucial to approach real estate investment with caution, starting slow and small to mitigate risks. As with any investment, thorough research, understanding of market trends, and consultation with financial professionals are essential. With these considerations in mind, individuals can embark on their real estate investment journey and potentially reap the rewards of this lucrative market.