Is Real Estate a Good Investment?

Contributor, Benzinga

Real Estate Offering Update: CityVest Has Launched Catalyst Access Fund With 20%-25% Target Annual Returns (Accredited Investors Only).

Real estate is a good investment if you are looking to diversify your portfolio and make passive income. The trick to investing in real estate is knowing how to go about it for the best capital gains and lowest risk.

Many opportunities are available to invest in, but knowing what’s best for you and your future plans — plus understanding how to manage these holdings — are the keys to having success in real estate investing.

Is Real Estate a Good Investment?

Provided you invest in property that you understand and can comfortably manage, investing in real estate can be an amazing investment. Researching and doing your due diligence are major factors when any investment is involved.  

Inflation: Real estate prices tend to rise with inflation. The value of a property usually increases as long as you keep it maintained and have done your research on the area you are investing in. A great house in an up-and-coming neighborhood will likely rise in value, while a property in a forgotten town off the beaten path may never achieve the returns you’re after. Keep an eye on the market and the news — on what’s being built in different areas and what neighborhoods have been struggling. 

Force Appreciation: It is possible to force appreciation. While properties often naturally appreciate about 3% to 5% a year in many real estate markets, you can make your investment more desirable and attractive to potential buyers or renters by renovating. Renovating can add value to your property — but be careful not to overdo it. You can end up tying up too much money in renovation and not getting your investment money back. Adding square footage is great but can be expensive and raises property taxes — so explore all your options. Low-key renovations can be great for adding value.

Updated bathrooms and kitchens are highly sought after, but make sure they appeal to the masses. Know what style is popular in your investment market to add the right look to your property for the best appreciation. Maybe modern is what’s selling or renting quickly in your market, not farmhouse chic. Things like a fresh coat of paint, a new roof or new appliances can boost value and appeal to potential buyers and renters.

Leverage: Real estate allows you to leverage your investment. Most people don’t have the cash to buy a house outright, so they put 20% down and take out a loan for the rest. You now have an investment property worth a whole lot more than you have spent on it. Once you have equity in the property, you can also use that to invest in your next income-producing property. 

Tax benefits: Many people don’t realize the tax benefits that come with owning property. Treating real estate as a business enables you to qualify for several benefits that are worth going over with your tax advisor. A few deductions include maintenance and repair costs, mortgage interest, real estate taxes, HOA fees and insurance. These costs can really add up, and it’s important to know that you can write them off at the end of each year. 

Cash flow: Cash flow is an important thing on any investor’s mind. Real estate investing doesn’t disappoint. Holding onto your investment and renting it out yields passive monthly income and a dependable cash flow. If your lease is for a year with a good tenant, you’ll be getting that extra money every month for a year. Then re-evaluate the market next year and see if a rent increase is possible. Having reliable tenants that help you pay down your mortgage and cover your taxes each month — all while leaving you with passive income — makes for a great investment. 

Build a Legacy: Owning property is not only a great investment for you but for your loved ones’ long-term security. Passing down an income-producing property or a property that keeps appreciating will leave your heirs with a great investment to continue earning from or cash out on. It could be a building block for their future investments or a windfall of cash when they need it most. 

What Type of Real Estate Investment Is Best?

You can choose from many types of real estate investments. As an investor, you make decisions based on what will work well for you as far as what you have now, what you want in the future and what kind of work you are willing to put in. 

Your Home

Your own home is a good investment in itself. You can sell it when the market is good. You can borrow against your equity. Renting it out is also an option for added cash flow if you decide to move in with a family member or significant other or if you have extra space. If your house is in a great location and well kept up, maintaining it as a rental or selling at the height of the market are great ways to benefit from your investment — one that you also got to personally enjoy for years.

House Flipping

House flipping isn’t for everyone, but if done correctly it can be a real money maker. You do need to spend money to make money, so make sure you have the cash to spare. Many of these homes are not in great shape and require a hefty amount of work to get them to be sale- or rent-ready. Real professionals are needed too — electricians, plumbers, roofers, contractors and landscapers. If you are handy or have enough connections or are already a contractor, it can work and become an amazing side business. 

Rental Properties

Many investors get into real estate investing through rental properties. Maybe you get your feet wet with one and see that it’s a relatively safe investment. So, you get another one. Or a multifamily house next time. Having the monthly income coming in sets you up for more investments and a long-term cash flow. Just make sure to keep your properties well maintained and located in desirable areas for quality renters. 

Commercial Real Estate

Investing in commercial real estate takes place on a much higher level. Although it’s trickier and requires more money upfront, more risk can mean more reward. This type of investment is best for long-term investors ready to take bigger risks and access the potential to make big money. With better lease options than residential real estate, and usually much larger price tags, commercial real estate is an exciting investment opportunity. 

Plots of Land

Land can be a great investment if you have the right connections. Knowing what the land is worth and if developers are interested in the area is ideal. Sometimes it can be a good idea to buy a plot of land if you see it at a great price and just sit on it. 

REITs

Investing in Real Estate Investment Trusts (REITs) could work for you if you like being a passive investor. With a REIT, you invest in a company that handles everything for you. They own, maintain and rent out income-producing real estate for you and other investors. Then they return at least 90% of their taxable income to their shareholders in the form of quarterly or yearly dividends. 

Real Estate Crowdfunding

Crowdfunding is another investment option. Various amounts of money from investors is raised— usually online — to secure financing for a real estate project. Investors buy equity in deals that look to be great investment opportunities. Depending on the investment, investors then receive a passive income or lump-sum payment if the deal succeeds.

Benzinga’s Best Real Estate Investment Platforms

With so many options for real estate investments, it can seem confusing and a bit overwhelming. Benzinga is here to show you the best real estate investment platforms for your investing success. 

get started securely through CityVest’s website
Disclosure: Must be accredited investing a minimum of $25,000.
Fees
0.75%
Minimum Investment
$25,000
1 Minute Review

CityVest is a web-based real estate investment platform that was established to give small-to-medium-sized investors access to real estate investment opportunities that typically require 6-figure minimum investments. CityVest does this by pooling multiple investor contributions into 1 bundle large enough to satisfy the minimum investment requirements of the best institutional private equity real estate investment funds.

Best For
  • Individual investors seeking access to institutional investments
  • Experienced investors looking to diversify their portfolio
  • Investors seeking investments with strong due diligence and screening
Pros
  • Access to high-performance institutional funds
  • High returns
  • Intense vetting of investment opportunities
  • Third-party due diligence on all funds
  • No registration needed to review investment opportunities
  • Quarterly distributions
Cons
  • Only available to accredited investors
  • Not a lot of investor control of fund options
Get started securely through Streitwise’s website
Fees
2% – 3%
Minimum Investment
$5,000
1 Minute Review

Streitwise is a unique online real estate investing platform that was designed to give investors, both big and small, an equal opportunity to invest in real estate. At its core, Streitwise is a real estate investment trust, but it’s one of the few online real estate investing platforms that is available to non-accredited investors.

Best For
  • Investors looking to diversify
  • Investors with less than $200k in annual income
  • Passive traders
Pros
  • Consistent quarterly dividends
  • Low, transparent fees
  • Low investment minimum
  • Convenient and easy to use
Cons
  • Limited offerings
Get Started securely through Arrived Homes’s website
Fees
1% asset management fee
Minimum Investment
$100
1 Minute Review

Arrived Homes is a real estate investment platform that focuses on building wealth through investing in rental properties. While most real estate platforms and REITs focus on commercial properties, Arrived Homes focuses on single-family homes as its source of rental income.

This focus on smaller properties allows Arrived Homes to sell ownership shares on individual properties to non-accredited investors with buy-ins as low as $100. Learn more about Arrived Homes with Benzinga’s review.

Best For
  • Small- to medium-sized investors
  • Investors interested in rental income
  • Investors looking to diversify
Pros
  • Buy-ins as low as $100
  • Open to non-accredited investors
  • Offers ownership shares in real property (and all the tax benefits)
  • Multiple ways to earn dividends (rental income and property appreciation)
  • Great way to diversify portfolio
  • Open to self-directed individual retirement accounts (IRAs)
Cons
  • Long hold periods
  • No secondary market to liquidate shares
Get started securely through CrowdStreet’s website
Fees
1% – 1.75%
Minimum Investment
$25,000
1 Minute Review

Crowdstreet is an online real estate investment platform that lets investors choose from a wide range of real estate investment offerings to crowdfund. Crowdstreet investors are free to buy into managed funds, individual buildings or even build a bespoke investment portfolio that includes both kinds of deals.

CrowdStreet’s platform has a diverse range of property types, ranging from multifamily to office, industrial, self-storage and others.

 

Best For
  • Accredited investors
  • Long-term investors
  • Investors looking to diversify from stocks
Pros
  • User-friendly interface
  • Diverse investment offerings
  • Great investor resources
  • Proven performance history
  • Many offerings eligible for inclusion in self-directed IRA
Cons
  • Accredited investors only
  • Most offerings require a $25,000 minimum investment
Get started securely through Yieldstreet’s website
Fees
average 1-2%
Minimum Investment
$500
1 Minute Review

Yieldstreet is an online investment platform that specializes in alternative investment offerings designed to generate passive income and wealth for investors. The platform offers a 1-stop shop for a range of alternative investments ranging from real estate to structured notes and even art collections.

Best For
  • Accredited investors looking to diversify
  • Alternative investments to stocks and bonds
  • Investors looking for passive income
Pros
  • Easy-to-use platform
  • Carefully selected offerings
  • Excellent mobile app
  • Full spectrum of alternative offerings
  • Options for non-accredited investors
Cons
  • Majority of investments only open to accredited investors

Good Potential Returns from Real Estate

Real estate investing is a great way to earn a passive income because of the many opportunities for investors at any stage of their investing journey. Beginners and seasoned investors alike can find ways to build their real estate investment portfolio and increase net worth. 

Frequently Asked Questions

Q

What is the 2% rule in real estate?

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What is the 2% rule in real estate?
asked
A
1

The 2% rule is considered as a guideline to smart investing. It advises that you should only purchase properties as rental investments that will give you at least 2% of the purchase price back in rent each month.

answered
Q

Is real estate really profitable?

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Is real estate really profitable?
asked
A
1

Real estate can be profitable if you do your research and find the right type of investment for you. Decide if you want to be an active or passive investor and how much money you can put up, and then take advantage of the options and opportunities available.

answered

Accelerate Your Wealth

Arrived Homes allows retail investors to buy shares of individual rental properties for as little as $100. Arrived Homes acquires properties in some of the fastest-growing rental markets in the country, then sells shares to individual investors who simply collect passive income while waiting for the property to appreciate in value over 5 to 7 years. When the time is right, Arrived Homes sells the property so investors can cash in on the equity they've gained over time. Offerings are available to non-accredited investors. Sign up for an account on Arrived Homes to browse available properties and add real estate to your portfolio today.