When you think about investing in real estate, you may imagine a complicated process and dozens of financial barriers. But, this doesn’t have to be the case. There are many ways for people to begin investing, and sometimes with a lot less capital than you think.
There are a few ways to go about investing. Each method 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.
You can buy shares and watch as the value rises or declines over time. It may take a while to see big returns, and prices 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 get started. You would then invest in an already curated list of properties, giving you little to no say in the selection process. There are two types: public and non-traded REITs. The way they work is that they give investors 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 fees could be higher than 11%, meaning that investors 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 and difficult to sell off. There are also fees involved depending on the platform you use. With its permanency and a higher minimum investment, crowdfunding can be out of reach for many beginning investors. Also, while 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 fractional investing 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 saw high fees, illiquidity, and the 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 pick the property you want to invest in and then buy shares without minimums. Ark7 handles the properties and manages the tenants, so that you don’t have to deal with maintenance.
Currently, Ark7 has properties in Austin, Berkeley and Seattle—all hot markets—and properties are curated for high yield. The truth is, you don’t need a lot of money to start investing.
Sign up today to start browsing property listings on Ark7.