The Easiest and Hardest Ways To Invest in Real Estate — Ranked
Written by
Laura Bogart
Edited by
Kristen Mae
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You’ve always been interested in real estate. You’ve never met an open house you didn’t want to tour, even if you weren’t planning to move. You’re always streaming one of those house-hunting or house-flipping shows, wondering what it would be like to get into real estate investing yourself. Then the reality hits: Becoming a landlord or flipping houses seems incredibly hard.
Still, even if this avenue of real estate investing feels a little too daunting to you, that doesn’t mean you can’t become a real estate investor. There are more ways to get started than you’ll find on HGTV, and some are easier than others. GOBankingRates chatted with some experts to get a sense of how to rank these approaches to real estate investing, from easiest to hardest.
Real Estate Investment Trusts
A real estate investment trust (REIT) is an ideal way for aspiring real estate investors to get in the game. Essentially, a REIT is a company that owns and typically operates income-producing real estate, such as office buildings, apartment complexes, hotels, resorts, self-storage facilities, warehouses or even shopping malls.
Investing in a REIT is not only a relatively low-effort way to start in real estate, but it can also help diversify your existing investment portfolio.
House Hacking
Though house hacking sounds like the title of the next biggest hit on HGTV, it’s actually the practice of generating income from your own home. Typically, this means buying a multifamily property, living in one unit and renting out the others, so your tenants essentially cover the mortgage. As the property owner, you’d build equity and handle maintenance.
“House hacking enables you to live in a property while renting out other space, using low down payment financing to reduce costs,” said Brett Johnson, owner of New Era Homebuyers. “You have the benefit of utilizing the tenant’s rent payment to cover a portion of your mortgage and other home-related expenses.”
Real Estate Wholesaling
According to Johnson, real estate wholesaling is one of the easiest ways to get started in real estate investing. Wholesalers find properties and sell them to other buyers — without even making improvements or repairs.
“In a nutshell, real estate wholesaling is finding off-market properties at a discount, securing them under contract, and assigning that contract to an investor for a fee, without ever owning the property,” said Johnson. “Wholesaling requires very little capital and relies on an individual’s skills in negotiation and deal analysis without the risk of actually owning a property.”
Rent Out a Vacation Home
Acquiring a vacation home to rent out can seem like easy money, especially if you buy in a prime location, like near the beach or in a secluded mountain retreat. You expect bookings to be plentiful, but have you considered what you’ll do the first time a guest calls about an emergency maintenance issue? Or who will make sure the house is restored to tip-top shape between guests? Come to think of it, who’s handling marketing and guest vetting?
These are questions that Steve Schwab, CEO of Casago, urges investors to consider before taking on a vacation rental. “Owning a vacation rental is something that has the potential to be either an easy or a difficult investment, depending on how you approach managing the property,” he said.
If you take on the responsibility yourself, those late-night calls or cleaning tasks could get really old, really fast. Not to mention the physical and financial toll. You can make it easier by hiring a property manager or management company to take on the daily responsibilities, but you’ll still have to pay them well.
Become a Landlord
Imagine the benefits and challenges of renting out a vacation home — then magnify them. That’s becoming a full-time landlord. Sure, you benefit from consistent rental income from tenants on stable leases. But you’ll also have to handle repairs, emergency maintenance, landscaping, rent collection and tenant disputes.
Char Hiaring, founder of Sell My House Idaho, puts it bluntly: “I learned early on that becoming a landlord isn’t for everyone. It takes patience, problem-solving skills, and an ability to deal with tenant issues and property upkeep.”
Of course, you can always hire a property manager or management company, but you’ll need to check in regularly to ensure they’re doing everything you’re paying them for. At the end of the day, the buck for your properties will stop with you — so you need to be sure you’re up for the challenge.
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