How To Invest In Real Estate Online.

Traditionally, physical real estate has been a tangible asset class prized by investors who appreciate the ability to be more “hands on” with their portfolios. Physical properties give investors a more intimate relationship with their assets and allow for a deeper understanding of the investments themselves. It is worth noting, however, that the advent of technology has taken all of the benefits of investing in physical real estate and translated them to online platforms. It is now entirely possible to invest in real estate online while maintaining many of the benefits associated with tangible assets. In particular, real estate crowdfunding platforms and real estate investment trusts (REITs) are giving investors a chance to own real estate without actually owning a physical property. Let’s take a look at each and how they encourage investing in real estate online in their own unique ways.

Real Estate Crowdfunding Online

If you want to invest in real estate online without having to own a physical property on your own, you may want to consider a real estate crowdfunding platform. As their names suggest, crowdfunding platforms allow investors to pool their money together to invest in real estate. More specifically, the crowdfunding platform will present investors with an opportunity and allow individuals to contribute their own capital to fund the development or purchase of the asset. When the investment is complete or reaches a predetermined level of maturity, individuals who partook in the crowdfunding of the investment will receive a payout relative to their initial investment. To be clear, participants do not own the property themselves, but instead help fund the deal and collect profits upon completion.

Investing In REITs Online

One of the best ways to invest in real estate online is through real estate investment trusts. Otherwise known as REITs, real estate investment trusts are companies which own, finance, or operate income-producing real estate assets. Simply put, REITs are businesses that make money from physical real estate. That said, many REITs are publicly traded companies that investors can purchase shares of on the stock market. In a roundabout way, REITs allow investors to invest in real estate online without actually owning a physical property. By adding an REIT to a portfolio of stocks, investors will gain exposure to the real estate sector and the individual industry the REIT serves. Perhaps even more importantly, investors can realize capital gains through appreciation and receive income in the form of dividends.

How To Invest In Real Estate Online & Make Money

Investing in real estate online is not unlike any other investment strategy: there are no guarantees. Due diligence, patience and a keen eye for quality assets must be exercised in order to increase one’s chances of making money online with real estate investing. Outside of the traditional qualities that make up a good investor, however, there are a few more things online real estate investors need to be aware of if they want to increase their chances of realizing profits: Prioritize Growth Industries: REIT investors with long-term investing horizons should prioritize growth industries over high-yield dividends. That’s not to say high-yield dividends should be avoided, but rather that compounding in growth induces will result in greater returns over decades of investing. For example, oil and gas stocks tend to have high dividends because they produce so much cash, but up-and-coming renewable energy stocks may have a longer runway to grow their dividends over the years. In the event investors reinvest their dividends into REITs with growing dividends, compounding returns will eventually beat out high-yield dividends. Transparency Is Invaluable: Investing in real estate online removes the tangible aspect of owning a home. As a result, investors do not have first-hand information to work off of. Instead, online real estate investors who use crowdfunding platforms are at the mercy of the platforms themselves. Without access to the property, investors will need to make sure they prioritize transparency. Most notably, every aspect of the investment must be available to investors. Any attempt to invest in real estate online through a crowdfunding platform must be accompanied by due diligence. Make sure the details of the investment are ironed out and transparent for everyone involved. Looking at an investment should not result in more questions than answers. Beware Of Dividend Traps: While it may sound counterintuitive to dividend investors looking to increase income, investors who want to add REITs to their portfolios should not prioritize the highest dividend-yielding companies. On the surface, excessively high dividend yields look like the fastest way to add income to a portfolio. However, dividend yields that are too high are usually unsustainable. There is no universal percentage to suggest a dividend is unsustainable, but the more of the company’s funds from operations that are spent on dividends, the more sound the balance sheet will need to be. All things considered, investors may want to avoid dividend yields that are too high or unsustainable, as they may represent a significant red flag. Instead, investors should prioritize sustainable dividend yields that are easily covered by the stock’s funds from operation.

Summary

Investors who want to gain exposure to the real estate industry without owning a physical property should consider investing in real estate online. Both REITs and crowdfunding platforms allow investors to partake in some of the benefits of owning real estate without the work that has become synonymous with homeownership.