How Do I Invest in Real Estate?


If you’ve ever wanted to invest in real estate but were uncertain of how to get started, there are many options available to you. Hard money lending, REITs, REOCs, and commercial real estate are a few options to consider. If you’re looking for a lower investment threshold, crowdfunding sites are a great option. If you have a minimum investment of $5,000, you can start investing on some of these sites, and there are others with less expensive investments available as well.

Hard money lending

Compared to traditional banks, hard money lenders are generally more flexible and willing to make loan adjustments. Hard money lenders tend to evaluate deals using two different metrics: the loan-to-cost ratio (LTC) and the loan-to-value ratio (LTV). Prudent hard money lenders do not exceed a 75 percent LTC/LTV ratio, and instead keep it in the 60-65 percent range, providing some safety margin in the deal. They will also typically use the lesser of these two numbers, or even look at the recent purchase price of the property.


While hard money loans are beneficial for those who are rich and do not want to go through the red tape of traditional bank financing, they aren’t the only choice for real estate investors. Be sure to pay attention to the interest rates and terms of the loan before taking out one of these loans. Paying too much for a loan can have adverse consequences for your real estate venture. Hard money lenders can be hard to find, so if you are considering this route, be sure to do your homework.

Investing in REITs

When investing in real estate, REITs can be a smart move if you’re a conservative investor who prefers to preserve capital while enjoying steady income. This approach is not as appealing when interest rates start to rise, as REIT dividends may become less appealing when interest rates rise. However, investing in REITs is relatively easy, as long as you’re willing to take on a small amount of risk. You should open a brokerage account and choose which REIT to purchase, and then make your first transaction. Reputable brokerages to use are Vanguard, Charles Schwab, and Fidelity.

The first thing to know about REITs is their tax structure. They don’t enjoy preferential tax treatment, so dividends are taxed like ordinary income, so the amount you earn is taxable. REITs’ income distribution is broken down so that you can see how much your money is worth and what tax bracket you’ll be in. Normally, REIT management will provide guidance on how to best tax future income.

Investing in commercial real estate

An investment in commercial real estate has several advantages over other types of investments. One of these is the fact that it is highly flexible and can be customized to meet the investor’s specific needs. While digital assets are highly volatile and may disappear in a day, hard assets are steadfast. Commercial real estate, in particular, is highly valuable, as it can be converted into various goods and products. There are many different types of commercial real estate, but the most common types are warehouses and commercial office space.

The risks of a commercial real estate investment are generally low, but they can be severe. It’s vital to remain objective and remain disciplined while making investments in commercial real estate. You should not fall in love with a particular property if you haven’t researched it enough. Rather, start with small investments and learn from experience. Find a mentor or join a commercial real estate investment firm to gain more insight into the industry.

Investing in REOCs

Investing in real estate investment trusts (REITs) can be an excellent way to diversify your portfolio without taking on the risk of owning actual property. These investments are made by investing in real estate through companies that buy and sell individual units and common areas. REITs are sold in shares, and investors purchase them through a broker-dealer. REITs are great for avoiding the risks of real estate ownership while also enjoying the benefits of passive cash flows and capital gains.


The biggest risk of investing in a REPE is the lack of quality. However, this risk can be mitigated by the fact that REPEs produce income for five to seven years.

Therefore, investors do not have to worry about timing the market and can expect to get their initial investment back. REPEs are also tax-deductible. As such, investors do not have to worry about triggering capital gains taxes. REPEs also have a fixed distribution schedule.


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