Marc Jaffe is an Indianapolis investor specializing in alternative ways to grow a client’s portfolio. In the following article, Marc Jaffe explains how to diversify investments with real estate, with REITs, house flipping, or rentals as well as other interesting ways to build a diverse portfolio.
The best ways to invest in real estate are to buy into REITs (real estate investment trusts), flipping investment properties, or purchasing a rental property. These methods have been proven popular and effective ways to invest in real estate according to Marc Jaffe, an Indianapolis investor.
Diversify Investment Portfolios with REITs
REITs – or real estate investment trusts – are companies that own and/ or manage properties that generate their own income explains Marc Jaffe, an Indianapolis investor. One of the best ways to start diversifying an investment portfolio, REITs are a great way for investors to earn without having to buy or manage any actual properties.
Types of REITs
Marc Jaffe, an Indianapolis investor explains that there are three types of REITs, each generating income in a different way:
- Equity REITs
- Mortgage REITs
- Hybrid REITs
Most REITs are equity REITs, which manage income-generating real estate. Money is generated for those invested with people renting the property(s) says Marc Jaffe, an Indianapolis investor.
Mortgage REITs similarly make money, but with mortgages instead of rent. They also finance the properties they manage, and subsequently, their earnings are spread between mortgage interest and the funding costs.
Hybrid REITs use the investment strategies of both equity and mortgage REITs explains Marc Jaffe, an Indianapolis investor.
How to Invest in an REIT
Marc Jaffe, an Indianapolis investor explains that with all investments, the first thing needed is capital. Providing funding is available, investing in a REIT is fairly straightforward. Most commonly, people buy shares of a REIT through a financial advisor, or through a broker.
Alternatively, people can invest via an exchange-traded fund (ETF), which tracks and analyzes REIT companies explains Marc Jaffe, an Indianapolis investor.
House Flip Investment
House flipping is another tried and tested method of successfully investing in real estate, with experts saying there’s still a chance to receive a return on investment of more than 20%.
However, it is less straightforward than investing with a REIT, and requires more work from the investor – especially if the house requires renovation.
Investing in a Flip
Marc Jaffe, an Indianapolis investor says that the first thing to do is find an undervalued house that requires renovation. This can be done online, using sites like Zillow or Zoopla. Alternatively, cheap houses that have been foreclosed on, can be found at auctions.
Cost of House Flipping
When it comes to flipping houses, there are many variables to consider. Marc Jaffe, an Indianapolis investor explains that most of the costs are associated with repairing and remodeling the house, and include but are not limited to:
- The average neighborhood house price
- The original price vs desired asking price
- Cost of repairs vs the after-repair value (ARV)
- Cost of labor vs sweat equity
All of the above need to be thought through in considerable detail before any steps are taken, to ensure the investment is as safe as possible. Consider hiring real estate agents and/or general contractors to get as accurate an assessment as possible.
Rental Property Investments
Purchasing a rental property and becoming a landlord is another one of the best ways to diversify an investment portfolio by dipping into real estate explains Marc Jaffe, an Indianapolis investor. This requires the most long-term effort from an investor and brings on a significant workload too. Landlords receive almost all of their income through renting the property, though, and receive the largest cut.
Finding the Right Property
Marc Jaffe, an Indianapolis investor says to consider the rental location, just like any other real estate investment, which requires the proper research to be conducted. Location, neighborhood prices, and overall budget are all important factors in deciding which rental property will grant the greatest return.
Landlord Responsibility
Buying a rental property requires know-how on landlord-tenant relationships, property management (minor repair works, etc.), and rent agreements. Some landlords find this too tasking and will outsource some or all of their workload to a REIT.
Additional Ways to Invest
Besides the ways mentioned above, there are plenty of other ways to invest in real estate. Those ready to dive straight in can invest through an REIG, or real estate investment group. Ideal for people who want to own rental real estate without the hassles of running it.
Conversely, those taking a more cautious approach could consider simply renting out a room. It’s not exactly real estate investment, but it works off of the same principles as renting out an entire property.
Summary
Overall, there are plenty of opportunities for those with enough capital to invest in real estate, at least to some small degree. More and more, group investments are becoming more appealing to all parties involved and could become the safest and most common way for people to diversify their investment portfolios.
