When you think of investing in real estate, you may imagine a complicated process and dozens of financial barriers. However, this does not have to be the case. There are many ways for people to begin investing, some needing only as little as five dollars to get started!
There are a few ways to go about investing. Each way has its own advantages and drawbacks. We’ll go through a few here.
1. Through the Stock Market
Many people start out investing in the stock market. You buy shares of a public company and hope for the company’s success so that the stock value goes up. This means when you sell your share, you will have received more money than you originally invested. However, this is a risky environment as stocks are volatile and can change daily.
For example, you can invest in a public company like Disney through apps like Robinhood. You can buy shares and watch as the value rises or declines over time. This can take awhile to see big returns and can fluctuate often.
2. Real Estate Investment Trusts (REITs)
This is a way to invest in large-scale, commercial real estate. For this, you need a broker and a large sum of money to begin with. You would then invest in an already curated list of properties, giving you little to no say in the selection process. There are public and non-traded REITs. This makes money by giving you a percentage of the normal income from the property operations. Although this option is great to delve into real estate investing, it comes with a lot of disadvantages such as the lack of control over the property and the presence of brokerage fees. These could be higher than 11%, meaning you lose out on potential income.
With Crowdfunding, you can pool your money together with other investors in the hopes of future profit. Many of these shares are illiquid, or rather that they are hard to sell off. There are also fees involved depending on the platform you invest with. With its permanency and a higher minimum investment, crowdfunding can be out of reach for many beginning investors. An example of this is a platform called Fundrise. Here you can collaborate with other investors for future profit. However, during the time the project is in progress, you don’t receive funds and your money sits idle.
4. Fractional Investing
Fractional investing is an excellent way to dip your toes into the investment pool. Depending on the company, you can receive special benefits by investing partially in a property. An example of a company that helps you do this is Pacaso. This is a website that allows you and other investors to partially own a vacation property. The perk here is you get to use that property for an allotted time.
Another example is Ark7. Ark7’s founder, Andy noticed all of the downfalls of both crowdfunding and REITs when he was trying to begin real estate investing. He took note of the high fees, the illiquidity, and lack of direct choice in investing and came up with the idea for Ark7. Ark7 is a solution to the problem of confusing, expensive, and uncontrollable real estate investing. With Ark7, you get to pick the property you want to invest in and then buy shares starting as low as $5.40. Ark7 handles the properties and manages the tenets, so that you don’t have to worry.
Right now Ark7 has properties in Austin, Berkeley and Seattle, all super hot markets and tailors the selection process to make sure you get the most bang for your buck. You don’t need a lot of money to start investing!
Make an account today to start browsing property listings and begin your investment journey!