How To Invest In Real Estate

This post was written based off my own personal experiences with real estate. I am not a real estate agent nor am I a financial adviser. As with anything posted on the internet, continue to do your own research and consult qualified experts in your area before making any major financial decision.

This post contains referral links. They are placed for your convenience. If you use them, I earn a small commission that I use to support this blog. Thanks.

2020 was a wild year, to say the least. With so much turbulence and uncertainly, having a real estate portfolio to fall back on allowed me the financial freedom I needed to focus on my growing family while still having a nice check come in each month.

I’m thankful to be in this position, and it got me thinking; what could others do to get into a similar spot?

Being a landlord isn’t for everyone and it definitely comes with some pitfalls of its own. This isn’t a passive form of income for sure. But I have found that owning property along with other investments has over all been healthy for us and has given us multiple streams of income.

So how can you get started in real estate too?

Well, first off, let me just reiterate that I am by NO MEANS a professional in this, so use this blog as a jumping point to further your research before you make any finical decisions.

That said, over these past 3 years since getting into real estate, I have learned of a few ways that virtually anyone can start generating income off of and growing wealth from housing.

I’ll cover how we go about investing in rental properties as landlords in a separate post later on. However below I cover 4 other ways you can get started making money off real estate.

Rent Hacking

The first and probably easiest way for most people to start getting income from real estate would be the idea of rent hacking through subletting.

When Stephen and I had to move from our college town to our current area in 2016, we were stuck in a lease that still had 7 months left on it. Not wanting to be on the hook for two rents, we turned to subletting.

The practice of subletting (or subleasing as it’s called in some areas,) is when a tenant leases out a room or apartment that they are renting to someone else. While the original tenants name stays on the lease, the new tenants are responsible for the apartment upkeep and payments.

We moved in between semesters when finding a rental was difficult, and were offered $100 extra a month to sublet our little home. Seeing that between us we were only making about $2,500 a month at the time, that extra $100 was wonderful boost. And it’s likely that if you’re renting in a hard to lease area, you can take advantage of subletting like this too.

Just like anything in real estate, there are some pros and cons to subletting and rent hacking.

The pros are quite clear: Sublet part or all of your rental, and make some extra cash or live rent free.

However, you have to be mindful that 1) your ability to sublet is completely depended on the willingness of your landlord and local legislation, 2) you will end up sharing space with someone you have no power to evict if you choose to just sublet out a room and not the whole unit, and 3) you’re on the hook if your submitter skips out on the bill.

Keep in mind that there’s a lot of changing regulations with leasing and subleasing when it comes to tenant/landlord relationships with COVID going on too. This strategy is still working for many, but take some time to really consider if this would work for you in this moment before you consider it.

House Hacking

Just a step up from rent hacking would be house hacking. A really popular concept that I wish I had been able to take advantage of when we bought our first home.

The idea of house hacking is to buy a property, ideally putting down as little as possible, and then rent out the extra rooms to cover the cost of the mortgage.

You can either live mortgage free this way, or use the extra income to pay off your house even faster.

This is a great strategy if you can find a duplex for a great price, as it will give you your own space and someone else is paying for it.

I have serval friends who are currently doing this and they enjoy all the added savings they see each month. However, the downside is, if you loose your roommate, you still have to be able to cover the mortgage. And not being able to do so may mean loosing your house and damaging your credit.

There’s potentially a lot of loose here, however, if you take the time to research with a trust loan officer and apply for a house that you can afford on your own, you can better mitigate your risk going this route.

REIT’s

If you’re looking for the lowest risk way possible to get into real estate investment, then REIT’s are for you.

REIT’s stands for Real Estate Investment Trust, and they manage income generating properties. You can either invest in REITs individually or as a fund like I do on STASH.

Either way, REIT’s are a great way to diversify your portfolio and get into high dividend paying stocks. REITs are considered relatively stable stocks and are required to pay out 90% of their profits to shareholders. This means that their dividend pay out is generally much higher than other stocks and funds.

I’m invested in a few REIT’s that I’m really happy with through my STASH app. However, this article here will go in to much more detail on what REIT’s are and which types are available to invest in.

REIG’s

Alternatively to REIT’s Real Estate Investment Groups (REIG’s) gather small investors together to develop and run rental properties.

As a small investor, it can be difficult to raise capital to develop property on your own. And managing properties is a huge time commitment. REIG’s thus allows smaller investors to pool resources together in an effective way.

There are a few ways to get involved with REIG’s, including starting a group with a trusted group of people you know, or joining a larger, more established group.

I’m not as well versed in these at the moment, so I’ll leave some links below for you to do further research.

Besides buying rental properties (which I will cover in another post later this month), these are all great ways that most anyone can invest and get cashflow from real estate.

I have personally used most of these methods myself with great success. And while I’m currently not apart of any REIG’s I have a few friends who are and I’m very interested in learning more in the future.

If you are interested in any of these ways of getting into real estate, then I highly suggest to use this blog as a jumping point for continued research.

Check out the links that I have provided above, but also look up local legislation around leasing and housing, as well as talk to a resigned real estate agent, loan officer or financial advisor.

Do you think you’ll dip your toe into real estate this year? Let us hear how you’ll go about doing so!

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