There’s no doubt real estate remains one of the best ways for average investors to grow their wealth and generate investment income. But today’s real estate investment market is much different than it was a few years ago. A combination of advancing technology and innovative new strategies has transformed how savvy investors make money.
Let’s take a closer look at what you need to know to stay on the cutting edge and in the black.
AI-Powered Predictive Analytics
Recent advances in artificial intelligence and associated technologies promise to completely transform many aspects of our lives, including the real estate world. Rather than analyzing every potential property on your own or inputting numbers into a complex spreadsheet, AI models can help automatically analyze and flag desired characteristics of newly listed homes in more sophisticated ways than typical screening.
It’s also a major shakeup in the world of wholesale real estate, where AI and predictive models can help narrow down lists of homes to those most likely to be receptive sellers. In both cases, advanced models will also provide support for finding the right offer price and estimating rehab and other sometimes complex expenses. This can lower marketing costs and increase the rate of finding deals, which can provide considerable lifts to any portfolio.
REITs
Real estate investors who want to take advantage of the significant growth and other advantages of real estate but prefer a more hands-off approach to their money may find the solution with real estate investment trusts, better known as REITs. These investment vehicles trade like stocks or ETFs, allowing people to invest their money into a general fund, which managers use to buy or sell properties.
Many are geared toward specific strategies, regions, or types of properties. While real estate investors may not enjoy the same returns as those who buy their own real estate, they trade this slightly diminished profit for the lack of hassle and required time often involved with personally owning real estate. They’re also an ideal choice for real estate investors who don’t have a great deal of capital, as only a few hundred or thousand dollars is needed to get started, as opposed to the tens of thousands often required for traditional deals.
Tax Lien Investing
Another hands-off but potentially even more lucrative strategy is to purchase tax liens from tax collectors in your area or other desired investment locations. Local governments place liens on properties if owners haven’t paid their taxes or other obligations. These liens can then be sold to investors.
The property owners then need to pay their original bill, plus a set interest rate, to the investor. If they do, the investor takes their profit, and the lien is released. If the owners don’t, investors can eventually move to foreclose on the property, allowing them to take control of it for often just a tiny fraction of what the place is truly worth.
With proper research, there’s relatively little risk compared to the potentially significant return. However, due diligence is required to avoid complex possible pitfalls like second liens or bankruptcies.
Crowdfunded Real Estate
Crowdfunding has taken the worlds of entrepreneurship and charity giving by storm, so why not real estate, too? At its core, crowdfunding is essentially just a more accessible version of the age-old strategy of real estate syndication. Basically, many investors pool their money, which is then managed by a sponsor who does the development work in exchange for an extra share of the profits. Crowdfunding offers the advantage of being able to use online platforms rather than the complex legal requirements of traditional syndication.
Other Advanced Real Estate Considerations
While one of the best benefits of real estate is that it’s relatively straightforward to get started, advanced investors should make sure to keep in mind a variety of other factors and trends that can boost your returns or unexpectedly erode them. As awareness of the environment and inequality grows, socially conscious and sustainable investing has grown with it.
These trends can encourage developers or others who can create eco-friendly or equity-focused real estate. It’s also vital to keep updated about regulations and laws, like the concept of opportunity zones, which can allow investors to take advantage of tax benefits for buying in traditionally underinvested areas.
Likewise, wholesale real estate laws are still somewhat unsettled in many areas. While wholesalers can often operate without a real estate license, that may change and be subject to other rules or restrictions. Of course, taxes are a consideration for any investor. It’s worthwhile to work with an experienced, skilled accountant with knowledge of real estate who can more than pay for themselves with tax savings and other benefits.
Stay Ahead Of Other Investors With Cutting-Edge Strategies
Whether you’re a buy-and-hold investor, a fix-and-flipper, or practice wholesale real estate, the market is changing in ways that are vital to understanding. Keep these critical issues in mind, and you may be surprised to find yourself leading the pack among fellow investors. Staying on the cutting edge isn’t just cool – it’s also vital for a healthy portfolio.
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