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Feb 26, 2018

Two Ways to Start Investing In Real Estate

By Lindsay Goldwert
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There are two common ways to invest in real estate. The first and most well-known option, purchasing a mortgage loan, comes with substantial up-front costs in the form of a down payment.

The second option, a real estate investment trust (a REIT) is another way to invest in property.

Investing directly with a mortgage

In many cases, when applying for a mortgage, you may be asked to  make a down payment equivalent to 20% of a property’s total value.

For example, if you wanted to buy a home that costs $200,000, you would need to have $40,000 for a 20% down payment.

Making a 20% down payment allows you to pay smaller monthly amounts. It also means you will likely pay lower interest rates, resulting in a smaller loan amount overall.

While a down payment of 20% has its benefits, it may not be practical for all investors. Not everyone has $40,000 to invest in real estate, especially if they’re not planning to live in that residence.

A mortgage loan can also include additional closing costs as well as insurance and taxes.

Investing in a Real Estate Investment Fund (REIT)

For those who are unwilling or unable to make a large initial investment, a real estate investment fund (REIT) may be more appealing.

A REIT lets you invest in real estate without having direct exposure to the underlying assets. You don’t have to buy commercial real estate to invest in a REIT.

A REIT is a company that deals in real estate and associated income-producing assets. This can include apartments, office buildings, hotels, storage facilities, shopping malls, warehouses, and more. REITs purchase properties so that they can operate them as part of a portfolio, rather than reselling them.

Publicly-traded REITs are listed on a stock exchange and are registered with the SEC.

REITs provide a means by which to include real estate in your portfolio. Stash allows you to invest in the real estate industry for as little as $5.

We have a selection of over 40 different publicly traded funds to choose from. Visit our page and learn how you can start investing in REITs today.

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author

Written by

Lindsay Goldwert

Lindsay Goldwert is an author and freelance personal finance writer, as well as the host of Spent podcast

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