Let’s face it, it’s 2021 we should all know the benefits of investing by now. Investing is a great way to build wealth because it allows you to accomplish your financial goals and retire early.
Investment vehicles, such as bonds, certificates of deposits, and pension plans are low-risk, so these investments typically produce lower rewards. Some higher-risk investments such as stocks and cryptocurrency can yield a high reward, but come with a high level of market volatility which makes this risky as a sole investment.
It is important to have a diverse investment portfolio, meaning the more places you can spread your investments, the higher chance you have of receiving a positive return. Out of many possibilities, there is one investment market that has a proven track record at producing returns and has serious benefits in the meantime: real estate investing.
What is real estate investing, and why should you consider adding it to your portfolio? First of all, there are several modes of investing in real estate. Let’s dive into
residential rental properties.
Investing in rental properties is one of the most secure types of investments out there. Unlike the stock market which is known to be unstable, if you put in the effort to maintain your property it will be sure to appreciate. This provides some extra income, or can even be a full-time job. While you will need to put a significant amount of money down to initiate this investment, you will earn it back within a few months of renting, not to mention the tax deductions and other benefits that come with owning multiple properties.
If you still want to get involved in the real estate investment space, but don’t want to deal with rental properties and tenants consistently, why not consider buying a
real estate investment trust?
According to
Nerdwallet, real estate investment trusts (REITs) allow you to invest in real estate without the physical property. Usually compared to mutual funds, they are companies that own commercial real estate such as office buildings, retail fronts, apartments, and hotels. REITs tend to pay high dividends, which makes them a great way to gain passive income. If you don’t need the regular income, you can reinvest those dividends to grow your investment even further.
Want to test the real estate investment waters but cannot afford to buy a new property or join a REIT? Try
renting out your current space on Airbnb! As travel is starting to pick back up post-initial COVID-19 hysteria, Airbnb is a great way to gain some extra income if you have an available room and don’t mind sharing your space. You spend good money to heat and cool your entire home, are you using all available space? Chances are you aren’t.
You can earn as much as you would with a full-time roommate in just a few days with Airbnb, and you do not need to worry about splitting your home 50/50 as you would with a typical roommate. You can even keep your overhead low in your home if you choose to rent with Airbnb.
All in all, there are many ways to earn extra income by investing in real estate. While most options require that you have start-up capital and/or a large enough space to rent out, it is possible to take these resources and create a regular second income without having to quit your day job.
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