What to know about investing in real estate

Investors considering real estate have many options:

Become a landlord

NerdWallet says buying a property with the intention of renting it out is one of the most common ways to invest in real estate. However, this could be one of the more labor-intensive real estate investment options, as it requires property owners to field calls from renters and always be available to tackle issues that inevitably arise. Plus, if renters are not properly vetted, landlords may end up with less-than-ideal tenants. While there are management services that can offset some of the work, farming out tasks comes with expenses that can cut into profits. Still, when a successful renter-landlord dynamic is established, this option can provide significant long-term income.

Flipping properties

Buying a property and “flipping it,” which means renovating and putting it up for sale shortly after, is another real estate investment venture. Flipping requires a lot of work and perhaps even some extraordinary skills. First, it involves finding up-and-coming neighborhoods and then renovating within a reasonable budget so that you can sell the home at a premium. Remodeling costs can run high, and the time involved in flipping may be longer than investors anticipated.

Buying your own home

Building equity in a home creates a nest egg that homeowners can tap into at a later time, particularly when they choose to sell. Bankrate says banks treat owner-occupied properties more favorably, giving borrowers lower mortgage rates and requiring lower down payments.

Purchase REITs

REITs are real estate investment trusts that enable investors to invest in real estate without actually touching physical real estate properties, advises NerdWallet. REITs are like the mutual funds of the real estate realm, and include companies that own commercial real estate. REITs can pay out high dividends, making them popular retirement investments. Dividends can be reinvested to grow your money further.

Investing in real estate can be a worthwhile option for people who want a tried-and-true vehicle for seeing their money grow.