If you ask investors, many will tell you real estate is the best place to park your money for long-term gains. Despite the money-making potential of real estate, some experts say millennials are opting out of the market.
However, investing in properties may not be out of reach, even for those millennials who have a small bank account. I recommends millennials first invest in real estate funds. It’s one of four options available to young investors who want to make money off the real estate market.
Option No. 1: Invest in REITS
REITs, or real estate investment trusts, are companies that own or finance income-producing real estate in a range of property sectors.
They allow individual investors to buy shares in commercial real estate portfolios that receive income from a variety of properties, including apartment complexes, data centers, healthcare facilities, hotels, infrastructure (e.g., fiber cables, cell towers and energy pipelines), office buildings, retail centers, self-storage, timberland and warehouses.
Option No. 2: Invest in REITS ETFs
REIT ETFs are exchange-traded funds that invest the majority of their assets in equity REIT securities and related derivatives. REIT ETFs are passively managed around an index of publicly traded real estate owners. The indexes may vary from provider to provider but two frequently used benchmarks are the MSCI U.S. REIT Index and the Dow Jones U.S. REIT Index. Those two indexes cover about two-thirds of the aggregate value of the domestic, publicly-traded REIT market. REIT ETFs are characterized by their above-average dividend yields.
Option No. 3: Invest in
Real estate crowdfunding
Crowdfunding is a new tool for raising money for businesses and an easier way to access such ventures for investors. It utilizes social media outlets like Facebook, Twitter
Crowdfunding and the real estate market are a natural fit. In a word, crowdfunding makes use of the easy accessibility of vast networks of friends, family, and colleagues through social media websites like Facebook, Twitter, and LinkedIn to get the word out about a new business and to attract investors. Crowdfunding has the potential to increase entrepreneurship by expanding the pool of investors from whom funds can be raised beyond the traditional circle of owners, relatives, and venture capitalists.
Option No. 4: Buy Your Own Property instead of Renting
Not everyone wants to buy a piece of a mortgage or real estate through a fund or REIT. Some millennials may prefer to actually own
Before making an offer, millennials should carefully consider the expected cash flow of the property, how it will be managed and the exit strategy for getting out the investment when needed. Those are all discussions that may be best had with a professional such as a real estate broker, certified public accountant or financial advisor.
Option No. 5: Buy for Rental Property
Residential rental property refers to homes that are purchased by an investor and inhabited by tenants on a lease or rental agreement. Residential real estate can be single-family homes, condominium units, apartments, townhouses, duplexes and so on.
There are a number of advantages and disadvantages to buying a property and then renting it out. Talk to an accountant, lawyer, mortgage broker or other financial expert about how it may affect your taxes and financial situation.
Real estate investing isn’t only for the old or the rich. Even millennials with limited means can use real estate to build their personal wealth.