Investment property, also called investment Real Estate is one of the primary asset classes you need to be invested in to have a balanced portfolio, and in this article I expand on 4 simple ways to get these juicy assets working hard for you. Watch the video now.
If you need a reminder of the different asset classes you need working for you to create your financial freedom and provide a solid and secure framework for your freedom, check out the Investment Pyramid here.
When thinking about Real Estate or Investment Property, most people think that the way to benefit or the only way they can invest in investment property is by actually owning the property and then renting it out to benefit from the income (the yield) and possibly some capital growth when / if the value of the property increases.
1ST SIMPLE WAY TO INVEST IN REAL ESTATE : OWNERSHIP
Owning a property, be it residential, industrial, commercial etc, is a key way to invest in real estate and a very valid way to get property assets working for you. Within this ownership model there are also many, many strategies to grow your wealth and owning a property is also the easiest way to use leverage, wealth expansion borrowing. To understand the power of leverage, go watch this video.
Simple put, expansion borrowing or leverage is where you get a mortgage against an investment property and this significantly increases your returns.
I call Real Estate or Investment Property “wealth play-dough”, because there are so many things you can create with it and so many wealth creation strategies you can follow.
- You can add value by renovations and conversions.
- You can change the use from commercial to residential or any other use change and increase its value.
- You can increase the yields by changing the rental period from long leases to shorter lease periods.
- You can increase the yield by renting out individual rooms instead of the whole property.
Ownership is not the only way where you can benefit from this asset class.
The next simple way to invest in property is, through what are called Real Estate Investment Trusts – REITs for short.
2ND SIMPLE WAY TO INVEST IN REAL ESTATE : REITS
What Is a Real Estate Investment Trust (REIT)? A REIT is a company owning and typically operating real estate which generates income. This is NOT a property management company – the REIT owns the actual physical buildings, which means when you own a share of a REIT, you own a share of the properties it owns.
Most REITs specialize in a specific real estate sector, focusing their time, energy, and funding on that particular segment of the entire real estate horizon. However, diversified and specialty REITs often hold different types of properties in their portfolios. Properties included in a REIT portfolio may include apartment complexes, data centers, health care facilities, hotels, shopping centres, infrastructure—in the form of fiber cables, cell towers, and energy pipelines—office buildings, retail centers, self-storage, timberland, and warehouses.
One benefit of REITs for investors like us, is that they give us access to own types of real estate we typically couldn’t own on our own and they provide the opportunity to own real estate which generates dividend-based income.
WHy are REITs so sexy? Firstly you can invest in REITs in your retirement accounts, your retirement annuity, your superannuation, your SIPP , your RRSP, etc AND inside of your tax protected accounts like your ISA, your tax-free savings account, your Roth etc and you can own a whole bundle of different REITs in the form of an ETF!.
YES, you can invest in Real Estate Investment Trusts in the same way as you invest in index trackers.
So with one investment, you can own the best REITs around the world from the US, UK, Europe, Hong Kong, Australia and emerging markets.
Investing in REITs within your tax protected accounts give you all those tax benefits too and you get asset diversification and allocation within your portfolio too – super, super sexy.
3RD SIMPLE WAY TO INVEST IN REAL ESTATE : INVESTOR SYNDICATES / CROWDSOURCED PROPERTY
The third simple way to invest in investment property, without owning it on your own, is through what is called crowdsourced investing.
Thanks to the power of technology and the internet, crowdsourcing, or collective syndicated investing is making investment property and especially commercial investment property more and more accessible to invest in individually.
An example of a crowdsourced investment property platform which allows you to have access to really sexy property deals with smaller investment amounts is a platform like Wealth Migrate.
In a similar way as a REIT, these properties are owned by a legal entity, usually a Special purpose Vehicle (SPV) and you buy a share of the SPV and in doing so own a share of the physical property and benefit from rental income and capital growth. AN SPV is a subsidiary created by a parent company to isolate financial risk. Its legal status as a separate company makes its obligations secure even if the parent company goes bankrupt.
Via crowdsourced / private syndicate investing you can collectively own, for example, a medical building in the USA, a multi-family block of apartments and HMOs in the UK, student accommodation in Australia, all on one platform where collectively crowdfunding investment happens.
So, you know, you can from $1000 and in some cases maybe $500, start, invest and own a slice of that medical building, benefit from its return, its income for the year that it comes and capital growth. And then you can build up a portfolio, ’cause remember it’s super important we have diversification within the asset group so not all your money is locked into one type. So, you can get diversification geographically and with different kinds of property without you having to unblock a toilet ever. And so that is what is so exciting about the internet and what it’s enabling us to get access to.
4TH SIMPLE WAY TO INVEST IN REAL ESTATE : USE IT, DON’T OWN IT
The fourth simple way for you to benefit from investment property is all about usership not ownership.
I’ve mentioned rent-2-rent as a strategy in a previous article.
Rent-2-Rent is where you rent out a house, a unit, an apartment, a garage and then rent it on to others with added values and services.
Think Airbnb, but you rent out someone else’s space!
You can do this strategy in a small way by renting out a room in your neighbours house, a yurt you put in their back garden, somebody else’s loft space and so on.
Or you can go to the other end of the scale and create a big business with rent-2-rent , building a portfolio of buildings where you rent the buildings and then create multi let spaces where you rent out rooms for student accommodation, professional shared spaces, an entire apartment block or you convert commercial into individual units for mid-level professional individuals who don’t want to live individually and want the benefit of collaborative community living without having to create it themselves.
The point is, any real estate investment strategy you can do by owning the property you can do by renting it instead.
Pretty damn sexy as I said.
I hope these 4 simple ways to invest in Real Estate has inspired you to see there is no reason for you to not benefit from this amazing asset class.
Get real estate and investment property for you together with your other assets so you can get on and live with the life you really want.
In the comments below I’d love to know which of these 4 simple ways to invest in real estate appeal to you most. Direct ownership, REITs, Crowdsourcing, Usership via rent-2-rent.
And let me know if you’re already doing one or more of these strategies and if so, which?
Please share in as much detail as you can. By sharing your journey and experience we open up money conversations and provide a clean and empowered platform for everyone to access the information and knowledge they need to get assets working for them.
When we create these safe conversations, we discover there’s so much more available to us, and so much we didn’t even know was available to us.
Sharing this knowledge keeps it juicy and exciting and helps us to stay focused on freedom.
All it takes is one step. And one step at a time is all any of us can take.
But what we can do is make the journey hell of a lot of fun and that’s the whole point of freedom.
P.S Along my journey of helping thousands of people (including myself) achieve financial freedom, I discovered there are 3 BIG Financial Freedom Saboteurs which can prevent us from achieving our freedom.
Knowing what Your #1 Financial Freedom Saboteur is and how to clear it from your path, is vital to achieving your financial freedom and living the life you want.
To help you discover your #1 Financial Freedom Saboteur I created a free assessment for you. Go here to take the assessment and discover your #1 Financial Freedom Saboteur and what you need to focus on to clear it from your life.