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Editorial Invest in Slovakia
How to invest in real estate, you ask? Buying and owning real estate is an exciting investment strategy that can be both satisfying and lucrative. Unlike securities and bonds, property owners use leverage to purchase a given property, thus paying a portion of the total cost upfront and then paying off the remaining balance with interest. They can also take advantage of a traditional mortgage, but this generally requires a down payment of 20-30% the purchase amount to purchase the entire property. Of course, there are several ways to invest in real estate. Let's imagine them:
This option is ideal for skilled people who can cope with home renovations. They also have the patience and time to manage tenants. The important thing is to own substantial equity at the outset, sufficient to maintain and cover the months when the property will not be occupied. Rental properties will provide regular income and maximize available capital through leverage. Many expenses are tax deductible and any losses can be offset by gains on other investments. Once the mortgage is paid in full, most of the rent becomes profit. If you don't have the time to manage the property, consider hiring a property manager, which comes with additional expenses and responsibilities. In some cases, such as properties used mainly seasonally, you need to work out how the investment will make money outside of this period. One option may be to reduce the rent.
It is necessary to have seed capital and extensive experience in valuation and marketing. Real estate trading is the wild side of real estate investing. Traders often want to sell undervalued properties at a bargain, while investors buy the property and try to hold on to it. Real estate trading is focused on shorter periods of time and depending on market conditions, you can quickly come to higher returns. On the other hand, you need to have a deeper understanding of the market as it can change unexpectedly and cause short-term investors to lose money.
If you want to own a rental property and do not want to deal with its operation you have the option of using investment groups. These most often invest in rental properties. Such a company buys or builds housing units and then allows investors to buy them, thus joining the group. One investor may own one or more units of the residential space, with the company in charge of the entire management of the property, for which it collects a percentage of the monthly rent. This is a practical approach to real estate investing that provides regular income, but the downside is overhead costs and therefore reduced profits.
You can invest in property without owning it. With the help of REITs. These are bought and sold on stock exchanges just like any other stock. Each publicly traded REIT has its own symbol, which you can use to find and buy them through your broker. REITs are dividend-paying stocks and can be sold virtually immediately at the market price. The risk is adverse developments in the real estate market.
The above options rely on sufficient capital. However, if you don't have it, you can invest via a crowdfunding platform. The company supports development projects by providing them with a portion of the funding that comes from multiple investors. This makes it possible to invest in crowdfunding real estate projects from as little as EUR 100, but even higher amounts and still achieve an interesting return. The advantage is above all the possibility to invest even a small amount in a project of your choice, and in the case of a popular platform with plenty of projects, to invest regularly and diversify, with all operations carried out for you by the platform. Disappointment can come with a delayed project implementation or a drop in the investment market. When choosing a platform, be especially careful to have enough legal security.
Source: Investopedia
