More women are investing money than ever before. While many women have invested in the stock market, only a small percent invest in real estate. Real estate is a great way to earn returns on your hard-earned money and is not as complicated as it sounds.
There are many different options available, and not all of them require a huge time commitment on your part. If you are a woman thinking about expanding your portfolio to include real estate, we have put together some tips and guidance to help you get started.
Different Types of Real Estate Investments
There are many different types of real estate investments. You can be very hands-on or more passive; it depends on how much of a time commitment and risk you are willing to put in. Some of the most common real estate investments to consider are as follows:
Mortgage Investment Entities (MIE) Also known as a mortgage pool, this is a low-risk investment that offers a steady monthly income. Once a mortgage transaction is completed, a lender will sell that mortgage to another entity, usually Fannie Mae or Freddie Mac. The entity then packages the mortgages together based on similar characteristics like similar maturity dates or interest rates. They are put into a pool that acts as collateral for a mortgage-backed security. You get paid based on the monthly principal and interest payments made from borrowers.
Real Estate Investment Trusts (REIT) A REIT is a cost effective investment for women who don’t have the time to take on a physical property, but still want to get in on the real estate investment game. A REIT is a publicly-traded company that invests in real estate projects like apartment buildings, shopping malls, office buildings, hotels, and warehouses. REITs are required to pay out 90% of their taxable income to shareholders, which is how you will make money.
Limited Partnerships (LPs) This is another type of passive investment where investors pool their money to either purchase or develop real estate. It is smart because you can partner with someone who may want to take on the hands-on management of the real estate project but does not have the money. In contrast, you may not want to get involved in the day–to–day decision-making and contribute money to the project. These are a higher-risk investment and require a lot of research to make sure you partner with someone who is reliable.
Rental Properties Purchasing a property and renting it out long-term is one of the most popular ways to invest in real estate. This type of real estate investment does require more money upfront. You will likely have to put at least 20% down to be qualified for financing. The returns can be quite lucrative and are worth looking into. There are a few ways you can invest in rental properties.
Types of Rental Property Investments
If you want to go the property buying route, there are many different options to choose from. Each has the potential to drive in some bring returns. Let’s look at the different ways you can invest in property:
Long-term tenant – Buying a single-family home or condo could be a great investment strategy. It will require a sizeable upfront investment; most lenders will require a 20% down payment on an investment property. The amount you charge in rent will need to be enough to cover your mortgage payment plus taxes, insurance, HOA fees, and maintenance plus extra to give you an income.
Going this route does require more work on your part, but you can hire a property manager to handle all of the really time-consuming tasks like screening prospective tenants, collecting rent, and making repairs.
Vacation rental – If you want to be really involved, short-term vacation rentals can be highly profitable if you purchase in the right area and market it correctly. Women have taken a massive role in making short-term rentals trendy by thoughtfully decorating and hosting the properties and then marketing through social media.
Short-term rentals do have more of a risk of damage from renters and may be seasonal. You will also have to solve problems quickly in the event a vacationer has an issue. However, the returns can be huge, often more than double the monthly income you would receive on a long-term rental.
Fix and Flip – If you are handy, a fix and flip may be a great project to take on. You would buy a home that needs work, either cosmetic or otherwise. You would then make those repairs as quickly as possible, put the home back on the market, and sell it for a profit. This is a very time-consuming project, but the returns could be huge. Some people even make fix and flipping a full-time job. There is a lot of risk involved in an investment like this which needs to be considered before going this route.
Other Tips and Things to Consider
Being a successful real estate investor can sometimes take a little trial and error. The trouble is, errors cost us money, and we don’t want that. Here are a couple of other tips and tricks to consider before diving into real estate investing:
Find Wholesalers
If you have decided to purchase property, it would be wise to find real estate wholesalers. They enter into a purchase agreement with a seller and then find a buyer to assign their contract to for a higher price. They get to keep the difference between the sold price and the price they agreed to pay.
Creating a solid relationship with wholesalers will allow you to get the heads up on available properties and negotiate the price down below market value.
Know Your Tax Laws
Tax laws are constantly changing, so it is important to know how much money you need to set aside, so you don’t get a surprise bill at the end of the year.
There are also money-saving deductions available to real estate investors, which vary by city and state. Make sure you have an experienced accountant you can talk to maximize your deductions and prepare for when you decide to sell your investment.
Join a Networking Group
There are dozens of women-only real estate investment networking groups all over the country. You can find them through social media or word of mouth. Each group may have a different focus, so find one that mirrors your interest. This is a great way to share ideas, learn from other successful women, and maybe make a friend to two.
Are You Ready to Invest?
Hopefully, we have been able to at least decide which real estate investing route you’d like to take. It is an exciting journey that will likely have some ups and downs. If you are smart, which we know you are, you will make a choice that not only diversifies your portfolio but also brings in some major returns. So whether you decide to take a passive approach or want to be more involved, know that you will be leading the way for other women who want to become real estate investors.