Our team at Diversified Investment Strategies loves the first line of a Nerd Wallet article we found: “If you’ve ever had a landlord, you probably don’t dream of being one.” While the three T’s – toilets, trash and tenants – doesn’t exactly sound like a dream come true, real estate can be one of the most lucrative investment option out there!
If you’d like to invest in real estate, but aren’t sure where to start, here are a few options that Nerd Wallet recommends:
-Invest in rental properties. You can live in the property and rent out spare rooms, rent out the whole space, manage it yourself, or outsource the management. You’ve got lots of options.
-Fix up and resell properties. Flipping homes has become big as of late, especially with popular shows on HGTV about doing this. However, it’s harder than it looks on TV!
-Use a crowdfunding service. Numerous companies will connect borrowers to investors willing to lend out money for a real estate investment project.
-REITs. These are a real estate investment trust that allows you to invest in real estate without dealing with any physical properties.
If you want a hands-off investment approach, our team at DIS recommends a REIT, or a DST or NNN, all forms of investments that we help clients with!
REITs are companies that own commercial real estate. Owning shares of a REIT can often pay high dividends. You need money to invest though, so this is a great option for retirees or current landlords who are looking to give up their daily hands-on duties.
REITs buy, sell and hold real estate properties consisting of a variety of different commercial properties, such as shopping malls, apartments, office buildings, hotels, etc. By owning shares in a REIT, you own real estate, much like with mutual funds.
If you are already a real estate investor, looking to earn more money and reduce your duties, you could use a 1031 Exchange. You cannot exchange your property directly into a REIT, however, because it’s not like-kind. For this to work, you can first exchange into a DST. Then after 18-24 months, your DST can be UPREITED in exchange for shares in the REIT.
Not every REIT is available for a 1031 exchange, and once you are in a REIT, you cannot complete another 1031 exchange. But benefits may include full diversification and owning shares of multiple properties, paying taxes a little at a time as shares are sold, and higher dividends.
For more details on REITs, 721 Exchanges, DSTs, NNNs and other forms or 1031 exchanges and real estate investment options, contact the DIS team! We are here to help you decide what investment option is best for you based on your current financial situation and investment properties. Contact us today!
Bryan Hakola
Diversified Investment Strategies
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